Weekly Fundamentals - 27 February 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote:
"Whilst the COT for risk as measured by the SP500 shows that large commercials have increased their net short position other factors also have an important role to play.
The fact that large commercials are carrying an extreme bullish position in crude, the fact that the NASDAQ100 COT shows them to be net long for the first time in 21 weeks and the fact that all alterations we have had to make for currencies have been negative strongly points to risk having momentum on its side.
Therefore for next week we would add the SP500, continue to favour the USD against all commodity backed currencies, continue to like but not love the GBP, worry about the YEN and short both gold and silver."
 
Now let us see how we fared on our trade recommendations.
Being positive the USD was a good call. The USD had a great week opening at 96.77 and closing near the highs at 98.04.
Adding the SP500 was also a good move as it rose nearly 30 points on the week.
We liked the GBP but did not love it. This proved to wrong as politics got in the way with talk of BREXIT.
Our worry regarding the YEN proved well founded as the USD closer at its highs of the week against it.
Short gold and silver was also ok as gold closed marginally lower and silver meaningfully.
 
We therefore got 3 out of 4 calls correct. Another good money earning week.

This is a busy week in terms of data for all the products we follow bar the EURO.

As it is the first week of the month it means it also is the first Friday so therefore the NonFarm Payroll data which everyone will be waiting for.

USD: On Tuesday we have Manufacturing PMI thought to show a small rise from 48.2 to 48.5.
Wednesday sees the release of Crude Inventories which will be closely followed.
Thursday sees the customary Unemployment Claims number estimated to be virtually unchanged from last month's 272,000 at 271,000. We also have Non Manufacturing PMUI thought to fall markedly from 53.5 to 49.8.
Friday is the big day when we have Average Hourly Earnings expected to fall from 0.5% to 0.2%, the NonFarm Payroll figure expected to be 195,000 from last month's 151,000 and the Unemployment rate expected to remain steady at 4.9%.
lastly we have the Trade Balance number expected to be virtually unchanged from the previous -43.4B at -43.5B.
COT data shows that large commercials reduced their net short position in the US$ Index from -35,176 to -32,947. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
EURO: There is no data for the Euro this week.
COT data for the Euro shows that large commercials continue to decrease their net long position very slightly from 53,764 to 53,527. This is a rolling 52 week low. We therefore remain SLIGHTLY BEARISH.
 
GBP:Three items for the GBP, all PMI related.
On Tuesday we have manufacturing PMI anticipated to rise from 48.2 to 48.5.
Wednesday we have Construction PMI at 55.5 from 55.0.
Finally on Thursday we have Services PMI expected to fall from 55.6 to 55.1.
 COT shows that large commercials slightly decreased their net long position from 57,559 to 52,788. We therefore remain BULLISH.
 
YEN: Only two newsworthy items for the YEN.
On Sunday we have Retail sales estimated to rise from lat month's -1.1% to 0.2% and on Monday we have the Household Spending figure which is expected to show a reduced fall from -4.4% to -2.5%.
COT data shows that large commercials continue to increase their net short position from -51,459 to -57,242. This is now a 52 week low. We therefore remain BEARISH.
 
AUD:A busy week for the AUD.
On Monday we have Building Approvals which is thought to show a considerable fall from 9.2% to -2.9%.
We also have the Cash rate unchanged at 2.00% and the RBA Rate Statement.
On Tuesday we see GDP expected to fall from 0.9% to 0.5%.
Wednesday is Trade Balance day estimated to be -3.22B from -3.54B.
lastly on Thursday we have Retail sales which is expected to rise from 0.0% to 0.4%.
COT data shows that large commercials continue to decrease their net long position from 5,308 to -4,593. This is the first time in 52 weeks that they are net short. We therefore remain SLIGHTLY BEARISH.
 
CNY:On Monday we have Manufacturing PMI expected to remain unchanged at 49.4.
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 dramatically reduced their net short from -82,753 to -19,211. We therefore alter our view from NEUTRAL to BULLISH.
GOLD: Large commercials again substantially increased their net short position from -131,984 to -163,149. Now that large commercials hold a net short position which is greater than 100,000 we are bearishness. We therefore alter our view from BEARISH to SUPER BEARISH.
SILVER: Large commercials continue to increase their net short position from -70,062 to -73,677. This is a new rolling 52 week low. We therefore alter our view from BEARISH to SUPER BEARISH.
 
The gold:silver ratio widened from 80.08 to 83.29 indicating strong silver underperformance for the week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net long position from 29,061 to 25,980. Large commercials generally carry a net neutral position and therefore their current net long is significant. However as this position is no longer close to a 52 week high to err on the side of caution and alter our view from BULLISH to SLIGHTLY BULLISH.
US 30 YEAR BOND: Large commercials again substantially increased their net short position from -24,328 to -38,430. We therefore alter our view from BEARISH to VERY BEARISH.
CRUDE OIL: Large commercials increased their net short position from -168,995 to -213,229. This is close to the 52 week extreme and close to their smallest net short position since December 2012. We therefore remain SUPER BULLISH.
CAN$: Large commercials continue to decrease their net long position from 52,387 to 43,501. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH.
NZD: Large commercials continue to decrease their net long position from 9,866 to 7,595. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH.
NASDAQ100: Large commercials slightly decreased their net long position from 7,883 to 6,480. We therefore remain BULLISH.

THOUGHTS FOR NEXT WEEK
Our view has not changed. In fact with this week's COT behaviour our view is only re-enforced.
Remain long risk as measured by the SP500, stay bullish on the USD, stay bearish on the commodity currencies, stay bullish on the GBP irrespective of political BREXIT noise and as from this week become bearish on the 30 year USD bond.
YEN remains a sell.
 
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