Macro Extremes (week ending April 5, 2024)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

The following assets (on a weekly timeframe) either registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations

U.S. 10 year yield minus German 10 year yield

U.S. 10 year yield 

Aluminium

Bloomberg Commodity Index

WTI Crude Oil

Copper

S&P GSCI 

Brent Crude Oil

Silver in USD

AUD/JPY

AUD/THB

USD/IDR

USD/SEK

USD/PHP

USD/BRL

MXN/USD

COP/USD

And Britain’s FTSE 100 Index

Overbought (RSI > 70)

Russian 10 year bond yield 

Cocoa

Coffee (Robusta)

AEX

KBW Bank Index

Budapest

DAX

Pakistan’s KSE

Italy’s MIB

Nifty 50

TAIEX

Toronto’s TSX

BIST 100

And the S&P 500 Index

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

Coffee (Arabica)

Biodiesel

CRB Index

Silver in AUD

Gold in AUD, CAD, CHF, EUR, GBP, USD and ZAR

Extremes “below” the Mean (at least 2.5 standard deviations)

Australia 10 year yield minus U.S. 10 year yield

North European Hot Rolled Coil Steel (HRC)

Lumber 

Oats

Rice

CHF/AUD

Oversold (RSI < 30)

Chinese 10 year government bond yields

Lithium Hydroxide

Iron Ore

Shanghai Rebar

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations below the weekly mean)

Australian Coking Coal

Chinese Coking Coal 

Notes & Ideas:

For the week, government bond yields rose.

While Chinese and Russian 10 year yields appearing either end of their pendulums, many yields are showing signs of breaking north of their recent sideways pattern.

The Japanese 2’s are amongst the nearest other bond yield to approach an extreme.

And we see some yield spreads appear in this week’s list.

Equities mainly fell for the week, across the world.

Regular readers wouldn’t be surprised about this weeks declines, considering the implied probability that rises when we saw the the long list of overbought equity indices appearing over the past few weeks editions.

The following equity indices dropped out of overbought territory;

KBW Bank Index, CAC 30, IBEX, Dow Jones Industrial Average, Nasdaq Composite, S&P MidCap 400, Vietnam,  Nasdaq Transports & the Philadelphia SOX and the Nikkei 225.

The latter fell 3.4% of the week.

Oslo is in a 6 week winning streak, while Mexico’s main index has put together 4 weeks of consecutive higher prices. 

Toronto’s TSX extends its winning streak to 8 weeks.

The DAX broke 8 week winning streak and Italy’s MIB broke its 9 week rising run. Both these indices joined the Nasdaq 100, SMI, ASX 200 and SOX in performing an bearish outside reversal week. 

Commodities were generally higher and it is where most of the week’s action was.

The major commodity indices have returned to overbought status, mainly driven by the energy and the industrial and precious metals.

Gold prices across various currencies remains overbought, with their weekly performances listed below.

Renewed media noise about the rise in oil and copper prices coincides with them trading at overbought extremes.

Coffee prices were there largest gainers for the week. Arabica played catch up to Robusta Coffee, the latter having risen 22% over the past 6 weeks.

Prices related to steel production such as coking coal, iron ore, rebar, are all in oversold territory.

The “coking coals” have fallen for 7 straight weeks, with Australian Coking Coal prices falling 32% over that time.

The Baltic Dry Index has slumped 35% over the past 3 weeks.

While U.S. Midwest Hot Rolled Coil Steel is approaching oversold territory, the North European price did so, this past week.

Crude Oil, Copper, Tin and Silver moved out of overbought territory.

Rice has fallen for 6 consecutive weeks and its price has declined 15% over that time.

Oats are oversold and have produced a 35% decline from their overbought extreme seen in August 2023.

Cocoa has been overbought for 24 weeks.

Aluminium has risen for 6 straight weeks.

And Lithium Hydroxide has now spent 39 consecutive weeks in weekly oversold territory.

Currencies saw a bit more activity this week, with a few more currencies return to the ‘extremes’ list.

The AUD rose.

The CAD was weaker as was the Yen. 

The Euro was mainly firmer, reversing last week’s weakness.

The British Pound was mixed for the week.

The USD was also mixed as we see it exhibit ‘extreme’ strength versus the  Indian Rupee, Swedish Krona, Philippine Peso and Brazilian Real yet it is trading at ‘extreme’ weakness against the Colombian and Mexican Peso’s.

In fact, the USD has risen for 5 straight weeks against the BRL.

And the Kiwi has declined for 6 consecutive weeks versus the Aussie.

The larger advancers over the past week comprised of;

Aluminium 4.9%, Bloomberg Commodity Index 3.4%, WTI Crude 4.5%, Lean Hogs 3.1%, Copper 5.7%, Heating Oil 5.7%, Coffee 12.5%, Nickel 6.4%, Platinum 2.1%, Gasoline 2.5%, Biodiesel 5%, Robusta Coffee 8.3%, Raw Sugar 2.2%, S&P GSCI 3.3%, CRB Index 2.5%, Brent Crude Oil 4.5%, Gasoil 6.5%, Silver in AUD 9.1%, Silver in USD 10.1%, Gold in AUD 3.3%, Gold in CAD 4.7%, Gold in CHF 4.4%, Gold in EUR 3.9%, Gold in GBP 4.2%, Gold in USD 4.3%, Budapest 1.8%, Egypt 3.4%, MOEX 1.9%, Oslo 1.8% and Turkiye’s BIST 100 climbed 5.2%.

The group of largest decliners from the week included;

Australian Coking Coal (7.7%), Baltic Dry Index (10.6%), Cocoa in London (3.4%), China Coking Coal (3.6%), Cotton (5.6%), North Europe HRC (3.7%), Lumber (2.4%), Cattle (3.7%), JKM LNG in Yen (2%), Lithium (9%), Newcastle Coal (2.1%), Palladium (1.4%), Sugar (2.3%), Dutch TTF Gas (2.7%), Urea U.S. Gulf (2%), Corn (1.8%), Oats (7.2%), All World Developed ex-USA (1.3%), KBW Banking Index (2.8%), CAC (1.8%), DAX (1.7%), DJ Industrials (2.2%), DJ Transports (1.8%), MIB (2.1%), IBEX (1.4%), Indonesia (2.6%), S&P SmallCap 600 (2.6%), Russell 2000 (2.8%), KRE Banking Index (4.1%), S&P MidCap 400 (1.9%), Nasdaq Biotech (3.5%), Nasdaq 100 (0.8%), Nikkei 225 (3.4%), Phillipines PSE (2.3%), SMI (2%), SOX (1.8%), Chile (2%), S&P 500 (1%), Nasdaq Transports (1.6%), Vietnam (2.3%), ASX Small Caps (1.7%) and the ASX 200 fell 1.6%.

April 7, 2024

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending February 16th, 2024)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

The following assets (on a weekly timeframe) either registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations

10 year Russian government bond yields

Lean Hogs

Tin

Overbought (RSI > 70)

Cotton 

Cocoa

Rubber

Uranium

Robusta Coffee

AEX

Italy’s MIB

KLSE

Dow Jones Industrial Average

NIFTY 50

Nasdaq Transportation Index

Egypt 30 Index

Philadelphia Semiconductor Index (SOX)

TAIEX

Budapest

And the S&P 500 Index

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

Nikkei 225

Russia’s MOEX Index

Turkiye’s BIST 100 Index

Extremes “below” the Mean (at least 2.5 standard deviations)

Shanghai Composite

Oslo’s OBX Index

Wheat

Oversold (RSI < 30)

JKM LNG

Lithium Hydroxide

Nickel on India’s MCX Exchange

Corn 

Soybean

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations below the weekly mean)

China 10 year government bond yield

Notes & Ideas:

Government bond yields were higher for week, again.

As mentioned in last week’s edition, many yields continue to move higher back towards the middle of their recent ranges.

German 10’s closed at their highest weekly close since November 20, 2023.

The Australian 10 year minus U.S. 10 year bond yield spread is in a 4 week losing streak.

The British 5 year’s are in a 5 week winning streak as are the Japanese 2’s. The latter have moved from 0.00% to 0.14% in that time.

Equities were stronger, however there were some losers too.

The Nasdaq 100, Composite and Transports aren’t overbought anymore, breaking wither their 4th or 5th consecutive weeks of advance.

The S&P 500 is still overbought but it did break its 5 week winning streak. It has risen for 14 of its past 16 weeks.

The CAC made a new all-time high.

The DAX performed a weekly outside bullish reversal which can be interpreted as a continuation of its rising trend.

Inversely, the Dow Jones Transports ‘did’ an outside bearish reversal, as ‘did’ the Nasdaq 100.

The Dow Jones Industrial Average broke its 5 week winning streak while it has now spent the past 10 weeks in overbought territory.

The S&P 500 is also in a 5 week winning streak and has risen for 14 of its past 15 weeks.

Amsterdam’s AEX continues to make new all-time highs.

Last week’s report that the Russell 2000 and the S&P MidCap 400 both performed a bullish outside reversal week has resulted in those indices bucking the declines seen in the other major U.S. indices.

Turkiye’s BIST has risen for 7 consecutive weeks making for a 22% (in TRY terms) return.

And the HSCEI has risen 6.5% over the past weeks……in amongst all of that pessimism.

Commodities were mixed with the notable advancers and decliners listed below. 

Cocoa and Sugar broke their respective 5 and 6 week winning streaks.

Precious metals had a good week. 

Softs and Grains were clearly weaker.

Energy was mostly weak, with Natural Gas tanking again.

WTI Crude outperformed Brent Crude.

Lithium Hydroxide prices was unchanged for the week, once again. 

Is this called consolidation or digestion?

Lithium Hydroxide has now spent 32 consecutive weeks in weekly oversold territory.

Cattle is in a 7 week winning streak and has closed higher in 9 of the past 10 weeks.

Heating Oil continues its roller coaster. This week it fell 5%, the prior week it rose 11%, the week before that it fell 6% and the week before that saw it rise 7%. Mamma Mia !

Cotton is in a 6 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 9 week losing streak and have fallen 13 of the past 14 weeks.

Henry Hub Natural Gas prices made an new all-time lows, having fallen 28% ion the past 3 weeks while JKM LNG are trading at their lowest close since December 20, 2020.

And Rice performed a weekly outside bearish reversal.

Amongst currencies, the collective U.S. Dollar (DXY) Index is in a 7 week winning streak.

The U.S. Dollar has risen for 7 consecutive weeks against the Chilean Peso which perhaps correlates with the tempered commodity prices of late.

The AUD rose for the week across its pairs, the CAD was slightly lower.

While against specific pairs, the U.S. Dollar has risen for the past 5 or 6 weeks.

The AUD has slight gains, thus putting an end to its consecutive losing streaks against many pairs such as the 6 week losing streak for the AUD/SGD.

The Yen was weaker, again which dances well with the risk-on temperament seen in equities.

The larger advancers over the past week comprised of;

Baltic Dry Index 4.2%, WTI Crude 2.5%, Cotton 2.9%, Lean Hogs 4.9%, Copper 4.3%, Lumber 2.1%, Tin 6.3%, Nickel 2.7%, Palladium 9.6%, Platinum 4%, Silver in AUD 3.5%, Oats 2.1%, Shanghai 5%, CSI 300 5.8%, KBW Bank Index 1.9%, China A50 2.8%, MIB 1.9%, HSCEI 4%, Hang Seng 3.8%, Indonesia 2.5%, KRE Regional Bank Index 1.8%, Nikkei 225 4.3%, Helsinki 1.8%, Stockholm 2.4%, S&P 600 Value 2%, SMI 2%, Chile 4.9%, STI 2.7%, TAEIX 2.8%, FTSE 100 1.8%, BIST 2.3% and the ASX Industrials rose 1.8%.

The group of largest decliners from the week included;

Rotterdam Coal (1.6%), Cocoa (4.6%), Heating Oil (5.3%), Hot Rolled Coil Steel (1.7%0, Coffee (2.5%), Newcastle Coal (2.3%), Natural Gas (12.9%), Sugar (3.9%), Dutch TTF Gas (8.5%), Gasoil (3.9%), Corn (2.9%), Rice (3.2%), Wheat (5.9%), Cocoa (2.7%), Robusta Coffee (2.4%), DJ Transports (3.6%), Nasdaq Composite (1.3%), Nasdaq 100 (1.5%), Oslo (1.9%), S&P 500 (0.4%) and Pakistan’s Karachi KSE 30 fell 5.6%.

February 18, 2024

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending February 2, 2024)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

The following assets (on a weekly timeframe) either registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations

Lean Hogs

Overbought (RSI > 70)

SHY 

Cocoa

Rubber

Uranium

AEX

Dow Jones Industrial Average

Nasdaq 100

Nasdaq Composite

NIFTY

And the S&P 500 Index

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

KLSE – the Kuala Lumper Stock Exchange

Turkiye’s BIST 100 Index

Extremes “below” the Mean (at least 2.5 standard deviations)

None

Oversold (RSI < 30)

Chile 2 year government bond yield

JKM LNG

Lithium Hydroxide

Nickel on India’s MCX Exchange

Corn 

Soybean

CSI 300 

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations below the weekly mean)

China 10 year government bond yield

Shanghai Composite Index

Notes & Ideas:

Government bond yields were mostly lower for the week, again, even with jump in yields seen in Friday’s session.

The British 2’s, 3’s and 5’s were the exception, wth rising yields for the 2nd consecutive week).

The Japanese 2’s rose in stunning fashion. They have climbed from 0.00% to 0.10% over the past 3 weeks.

Equities were mixed, with a slight weaker bias, although many more are appearing in the overbought column.

Indonesia rose 3.5% reclaiming all of last week’s decline.

The Dow Jones Industrial Average has pout together a 4 week winning streak and has spent the past 8 weeks in overbought territory.

The S&P 500 is also in a 4 week winning streak and has risen for 13 of its past 14 weeks.

The Shanghai Composite has now registered an oversold quinella.

Amsterdam’s AEX and the Nasdaq Composite are yet to reach a new all-time high but the former did close at its highest weekly close.

The Nasdaq Transportation Index finished at its highest weekly close but yet it to break its previous all-time high. It has risen 7% in the past 3 weeks.

And Turkiye’s BIST has risen for 5 consecutive weeks making for 15% (in TRY terms) return.

Commodities were weaker with energy contracts.

To accompany that weakness in energy, WTI Crude, Brent Crude and Gasoline prices posted bearish outside reversal weeks.

Cattle is in a 5 week winning streak and has gained in 7 of the past 8 weeks. Furthermore, Cattle is still trading at extended percentages (39%) above its 200 week moving average.

Newcastle Coal broke its 7 week losing streak.

Heating Oil fell 5.5% giving up most of last week’s 6.8% rise.

Sugar is in a 5 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 7 week losing streak and have fallen 11 of the past 12 weeks.

JKM LNG is at its lowest close since December 20, 2020.

And Lithium Hydroxide has now spent 31 consecutive weeks in weekly oversold territory.

Amongst currencies, the AUD has seen its 5th and 6th consecutive week of declines against many pairs, which sits proportionally within my published note on December 29, 2023 that the AUD was ‘full’.

Now, AUD/USD is full

The U.S. Dollar has risen for the past 5 weeks against most pairs.

The Yen was also firmer.

The AUD/CAD, AUD/USD and AUD/INR have declined for 5 consecutive weeks. The CAD/USD has done the same.

The AUD/GBP and the AUD/SGD has fallen for 6 weeks in a row.

The EUR/GBP has eased lower for its 6th straight week.

The larger advancers over the past week comprised of;

Rotterdam Coal 5%, Cocoa 7.2%, Cotton 3.3%, JKM LNG 1.8%, Newcastle Coal 2.4%, Orange Juice 20.3%, Dutch TTF Gas 4%, Uranium 6%, Gold AUD 2.1%, Oats 2.2%, Rice 2.5%, DJ Industrials 1.4%, Indonesia 3.5%, KOSPI 5.5%, Mexico 2.4%, NIFTY 2.4%, Sensex 2%, Nasdaq Transports 2.3%, BIST 100 3.8%, ASX 200 1.9% and the ASX Small Caps rose 2.5%.

For some reference, the Nasdaq Composite and the S&P 500 rose 1.1% and 1.4% respectively.

The group of largest decliners from the week included;

Australian Coking Coal (5%), Bloomberg Commodity Index (2.1%), Baltic Dry Index (7.3%), China Coking Coal (5%), WTI Crude (7.4%), Iron Ore (5.4%), Heating Oil (5.5%), Lumber (3.4%), Lithium (12.4%), Natural Gas (4.4%), Nickel (3.4%), Platinum (2.1%), Gasoline (7.7%), S&P GSCI (3.8%), Brent Crude (6.9%), Gasoil (2.6%), Soybean (1.7%), Shanghai (6.2%), CSI 300 (4.6%), KBW Banking Index (1.7%), China A50 (4.4%), HSCEI (2.6%), Hang Seng (2.6%), KRE Regional Bank Index (7.2%), Oslo (1.7%), Helsinki (2.3%), S&P SmallCap Value (2%) and Switzerland’s fell 1.3%.

For some reference, the S&P Small Cap 600 fell 1.2%, the Russell 2000 declined 1%, the SOX closed 0.1% lower and Toronto’s TSX eased 0.2% for the week.

February 4, 2024

by Rob Zdravevski

rob@karriasset.com.au