Macro Extremes (week ending February 7, 2025)

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.

n.b. pricing of (commodity) futures contracts is only considering the immediate front month.

*?denotes multiple week inclusion

Extremes above the Mean (at least 2.5 standard deviations)

Silver in AUD

USD/MXN

Poland’s WIG Index *

And the U.K.’s FTSE 100 *

Overbought (RSI > 70)

Brazil 10 year government bond yields

Japanese 2, 5 and 10 year government bond yields *

Dutch TTF Gas

Gold in AUD

Hungary’s BUX Index *

DAX Index

Israel’s TA35 *

Singapore’s Strait Times Index *

Chile’s IGPA Index *

Czech Republic’s PX Index *

Chile’s IGPA Index *

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

Arabica Coffee *

Urea (U.S. Gulf?price) *

Gold as priced in CAD, CHF, EUR & GBP

USD/INR *

Austria’s ATX *

Chile’s IPSA Index *

Spain’s IBEX Index

Extremes below the Mean (at least 2.5 standard deviations)

India’s 10 year government bond yields

Orange Juice?

Rice

CHF/JPY

EUR/JPY

GBP/JPY

CAD/JPY

Thailand’s SET Index

Oversold (RSI < 30)

Chinese 10 year government bond yields *?

U.S. 3 month government bill yield *

Australian Coking Coal *

North European Hot Rolled Coil Steel *

Lithium Carbonate *

Lithium Hydroxide *

Newcastle Coal *

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

INR/USD

Notes & Ideas:

Government bond yields fell, again.

While this week’s list boasts the same overbought entries as last weeks edition, we are seeing more streaks develop.

Chile’s 2 year bond yields are in a 5 week rising streak.

As are the Japanese 2’s, 5’s and 10’s.

Belgian 10 year bond yields have climbed for 4 weeks.?

Aussie 10’s, Norwegian 10’s and the yields across the British curve are in 4 week losing streaks.

The spread of the U.S. 10 year minus U.S. 10 year break-even rate has fallen for 4 straight weeks.

The U.S. 5 year break-even inflation rate is nearing an overbought reading. The last time we saw that was March 2022.

And I wanted to make a note that only a few weeks ago, the U.S. 5 year minus U.S. 3 month yield spread was overbought.

Equities mainly rose, while we saw weakness amongst small caps.

The CAC, the DAX and the Helsinki 25 are in 4 week winning streaks.

Poland’s WIG Index has climbed for 6 consecutive weeks.

Austria’s and Hungary’s main equity index have risen for 7 weeks straight.

Pakistan’s KSE, Switzerland’s SMI and the ASX Industrials Index fell from overbought territory.

The SMI broke its 6 week winning streak.

The SMI climbed 10% over that time.

Chile’s IPSA is in a 5 week rising streak and has risen for 11 of the past 13 weeks.

Philippines PSE broke its 4 week losing streak by rising 5%.

Indonesia’s Jakarta Composite is nearing oversold levels.

And the DAX is at an all-time high.

Commodity prices were mixed with a lower bias.

Arabica Coffee has risen for 5 straight weeks.

Orange Juice tanks further and extends its losing streak to 7 week.

Palladium gave up all of last week’s 6% gain and then some.

The Baltic Dry Index jumped from being oversold. It rose 11%. Prior to this week, it had fallen 59% over the past 2 months.

U.S. Midwest Hot Rolled Coil Steel rose enough to end its 36 week stay in oversold territory.

Copper, Coffee, Tin, Gases, Gold and Wheat gained.

Uranium, Oil, Coal, Orange Juice, Lithium and Cocoa fell.

Copper had a good week leading to a sharp rise in the Copper/Gold Ratio, arguably confirming a ‘risk-on’ environment.

Wheat is in a 5 week winning streak.

Corn has risen for 8 of the past 10 weeks.

Last week Cattle prices were overbought. They are no longer so.

Gold as priced in CAD has risen for 10 consecutive weeks.

Gold in USD has risen for 6 weeks while Gold in CHF is in a 7 week winning streak.

while Lithium Hydroxide has now lingered in weekly oversold territory for 88 consecutive weeks.

Currencies were active.

There is merit comparing the currency entries in last week’s edition and referencing those omitted in the edition.

The AUD mostly rose, reversing recent declines.

The AUD/JPY fell and is nearing oversold levels.

The Yen has been stronger against the USD for 4 weeks. This Yen strength is perhaps signalling an end to ‘risk-off’ sentiment?

The Brazilian Real has risen for 6 straight weeks versus the USD.

The Loonie rose from its recent doldrums and the CAD/USD isn’t oversold this week.

And the Euro was weaker, everywhere, again.

The larger advancers over the past week comprised of;

Bloomberg Commodity Index 1.9%, Baltic Dry Index 10.9%, Lean Hogs 3.7%, Copper 7.2%, Heating Oil 1.4%, U.S. Hot Rolled Coil Steel 2%, JKM LNG 2%, Arabica Coffee 6.9%, Tin 4.6%, Natural Gas 8.7%, Nickel 3.4%, Gasoline 2.2%, Tin 3.3%, Dutch TTF Gas 4.7%, Urea U.S. Gulf 2.9%, Gold in CHF 2.1%, Gold in EUR 2.5%, Gold in GBP 2.1%, Gold in USD 2.2%, Wheat 4.2%, Shanghai Composite 1.6%, CSI 300 2%, MIB 1.6%, HSCEI 5.4%, Hang Seng 4.5%, IBEX 2.6%, ASX Materials 1.7%, WIG 2%, TA35 2.4%, SA40 2.4%, PX 2.4%, PSE 5%, Mexico 3.1% and the KLSE rose 2.2%.

The group of largest decliners from the week included;

Richard Bay Coal (4.2%), Rotterdam Coal (4.8%), Cocoa (8%), Cattle (2.7%), Lithium Carbonate (4.2%), Lithium Hydroxide (3.1%), Newcastle Coal (9.2%), Orange Juice (10.9%), Robusta Coffee (2,8%), Sugar #16 (3.4%), Brent Crude (2.4%), WTI Crude (2.1%), Uranium (2.5%), Indonesia (5.1%), S&P Small Cap Value (1.8%), SET (2.5%), Oslo (2%), KSE (3.4%) and the Nikkei 225 fell 2%.

February 9, 2025

By Rob Zdravevski

[email protected]