Weekly Fundamentals - 23 January 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote "For this week we believe that the $ will strengthen against the YEN, weaken against commodity currencies, precious metals to underperform relative to the SP500.
As wicked, sharp and sudden the fall in risk has been an equally wicked and sudden corrective bounce is about to occur.
Therefore reduce precious metal exposure, add SP500, add STG and AUD and finally take profits on YEN longs."
Happily we were right.
Gold was virtually unchanged by rising less than 1%, The SP500 rose by 1.6%. USD rose sharply against the YEN. Both the AUD and CAN$ had a strong week against the USD and STG was virtually unchanged.
We have a busy week in terms of data with a number of important Central Bank announcements.
 
USD:
COT data shows that large commercials increased their net short position slightly in the US$ Index from 48,881 to 51,336. We therefore continue to remain SLIGHTLY BEARISH.
 
EURO:On Tuesday we have the German Economic Sentiment number expected to fall dramatically from 16.1 to 8.2.
On Thursday we have two important items.
We start with the Minimum Bid rate which is the interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system and is expected to remain unchanged at 0.05%.
This is followed by the ECB Press Conference.
On Friday we have both the French and German Manufacturing PMI numbers. The French number is thought to rise from 51.4 to 51.6 and the German to fall slightly from 53.2 to 53.
COT data for the Euro shows that large commercials slightly decreased their net long position from 179,372 to 161,751. We remain BULLISH.
 
GBP:Tuesday sees the release of CPI expected to remain unchanged at 0.1%.
On Wednesday we have Average Earning Index thought to fall from 2.4% to 2.1%
This is followed by Claimant Count Change which is expected to rise from 39,000 to 41,000.
Finally on Friday we see Retail Sales which is expected to fall quite severely from last month's 1.7% to -0.1% indicating contraction in retail activity and hence consumer spending.
Large commercials continued to increase their net long position from 54,401 to 58,816. This is the largest 52 week rolling net long and we therefore alter our view from BULLISH to SUPER BULLISH.
 
YEN:The only item for the Yen which in fact also affects the other currencies is the 4 day World Economic Forum starting on Wednesday.
The World Economic Forum is an annual meeting held in Switzerland and attended by central bankers, prime ministers, finance ministers, trade ministers, and business leaders from over 90 countries. Most meetings are open to the press and officials usually talk with reporters throughout the day. Comments from central bankers and other influential officials can create significant market volatility.
COT data shows that large commercials dramatically decreased their net long position from 4,543 to -23,845. We therefore remain BEARISH.
 
AUD:There is no data for the AUD this week.
COT data shows that large commercials significantly increased their net long position from 26,056 to 46,601. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH
 
CNY:Two items for the CNY this week both on Monday.
We start with GDP which is expected to remain unchanged at 6.9%.
This is followed by Industrial Production which is anticipated to fall slightly from 6.2% to 6.0%.
There is no COT data for the CNY.
 
COT data of note on products we regularly comment on in our DAILY REPORTS and WEEKLY BONUS VIDEOS and for those products which show large commercials with extreme net positions.
S&P500:large commercials increased their net short position from 36,731 to 59,451. Prior to last week the SP500 had suffered its worst start to a new year for many decades. The move was both swift and sudden. We continue to witness a marked increase in bearish commentary. This plus the fact that large commercial shorts not being at an extreme means we must continue to remain SLIGHTLY BULLISH in the short term.
GOLD:Large commercials decreased their net short position from 43,585 to 40,143. As long as large commercials hold a net short position which is less than 100,000 we err on the side of bullishness. We therefore remain BULLISH.
SILVER:Last week saw large commercials slightly increase their net short position from 30,562 to 36,034. We therefore remainNEUTRAL.
The gold:silver ratio widened from 78.27 to 78.43 indicating slight silver underperformance for the week.
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials slightly increased their net long position from 48,172 to 49,154. Large commercials generally carry a net neutral position and therefore their current net long which is close to a rolling 52 week high is significant. We therefore remain BULLISH.
US 30 YEAR BOND: Large commercials slightly increased their net short position from 5,114 to 5,734. We therefore remain SLIGHTLY BEARISH.
CRUDE OIL: Large commercials slightly increased their net short position from 178,240 to 191,047. This remains very close to their smallest net short position since December 2012. We therefore remain BULLISH.
 
From this week we are adding the commodity currency CAN$ to our COT analysis.
CAN$: Large commercials increased their net long position from 78,709 to 82,481 which is close to the 52 week rolling high achieved in August 2015 at 89,780. We therefore instigate our COT analysis on the CAN $ with a BULLISH signal.

THOUGHTS FOR NEXT WEEK
We are entering the last week of the first month of 2016. Incredibly already one twelfth of the year has nearly gone by. In this one month we have witnessed huge volatility with many traders having suffered severe drawdowns. Many traders will have gotten the vast majority of their trades wrong and will have to have to try recoup one month's worth of losses over the next 11 months.
They will begin over trading, they will begin to chase, they will end up getting stopped out both as the markets fall and rise and the end result is that they will end up losing whilst the markets end up virtually unchanged at the end of the year after hysterical bouts of volatility.

For next week we anticipate the USD to continue rising against the YEN, falling against the GBP, AUD and CAN$ and the SP500 to continue to slightly outperform against precious metals. Silver should outperform gold.

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Stay nimble. Good luck trading.

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