Weekly Fundamentals - 04 March 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote:
"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."
 
Now let us see how we fared on our trade recommendations.
Being positive on the USD was not a good call as the USD Index fell as all its constituent currencies rallied against the USD.
Remaining long risk as measured by the S&P500 was a tremendous trade as it rallied hard.
Being bullish on the GBP was also wise as it recouped virtually all its previous week politically induced BREXIT nonsense.
By turning bearish on the US30 year bond we also enjoyed a big move lower in price with the bond closing on its lows for the week.
Our bearish stance on the YEN was also rewarding.
 
We therefore got half our currency calls right, our risk trade right and the bond trade right. A good week.

This week's data is virtually non existent so COT findings are once again the main focus of our attention.

USD: We start the week of on Wednesday with Crude Oil Inventories. This will be closely followed in light of the strong showing by crude last week.
The last item for the USD is the customary Unemployment Claims figure on Thursday which is expected to be 272,000 slightly lower than last week's 278,000.
COT data shows that large commercials reduced their net short position in the US$ Index from -32,947 to -31,033. We therefore remain SLIGHTLY BULLISH.
 
EURO: Two important items for the EURO this week.
On Thursday we have the Minimum Bid Rate which is the interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system in the Eurozone. It is expected to remain unchanged at 0.05%.
Also on Thursday we have the ECB Press Conference.
COT data for the Euro shows that large commercials substantially increased their net long position from 53,527 to 86,498. We therefore remain alter our view from SLIGHTLY BEARISH to NEUTRAL.
 
GBP: Only one data point of note which is Manufacturing Production on Wednesday which is expected to rise from last month's -0.2% to 0.2%.
COT shows that large commercials increased their net long position from 52,788 to 62,384. We therefore remain BULLISH.
 
YEN: On Sunday the BOJ Governor speaks.
On Monday we have both the Current Account and GDP numbers. The former is expected to rise marginally from 1.64T to 1.66T. GDP is expected to remain constant at -0.4%.
Finally on Thursday we have the manufacturing Index which is anticipated to rise from 3.8 to 4.2.
COT data shows that large commercials continue to increase their net short position from -57,242 to -58,622. This is now a 52 week low. We therefore remain BEARISH.
 
AUD: There is nothing of interest for the AUD this week.
COT data shows that large commercials continue to decrease their net long position from -4,593 to -10,617. This is the second time in 52 weeks that they are net short. We therefore alter our view from SLIGHTLY BEARISH to BEARISH.
 
CNY:Three data points.
On Monday we have the Trade Balance number expected to fall from 406B to 329B.
On Wednesday we have CPI thought to be unchanged at 1.8%.
Finally next Saturday we have Industrial Production.
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 increased their net short from -19,211 to -48,604. We remain BULLISH.
GOLD: Large commercials again increased their net short position from -163,149 to -171,431. Now that large commercials hold a net short position which is greater than 100,000 we are bearishness. We therefore remain SUPER BEARISH.
SILVER: Large commercials decreased their net short position from -73,677 to -65,237. We therefore alter our view from SUPER BEARISH to BEARISH.
 
The gold:silver ratio narrowed from 83.29 to 81.18 indicating strong silver outperformance for the week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net long position from 25,980 to 26,263. 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 we remain SLIGHTLY BULLISH.
US 30 YEAR BOND: Large commercials slightly reduced their net short position from -38,430 to -32,198. We therefore alter our view from VERY BEARISH back to BEARISH.
CRUDE OIL: Large commercials very slightly decreased their net short position from -213,229 to -212,878. 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 43,501 to 37,575. We therefore remain SLIGHTLY BEARISH.
NZD: Large commercials continue to decrease their net long position from 7,595 to 5,886.. We therefore remain SLIGHTLY BEARISH.
NASDAQ100: Large commercials substantially decreased their net long position from 6,480 and are now net short -9,186. We therefore alter our view from BULLISH to NEUTRAL.

THOUGHTS FOR NEXT WEEK
The main thing that stands out for next week is the extreme bearishness that will engulf precious metals especially gold. Those long should either hedge or drastically reduce their positions. Traders should look to short. The fall will be deep and swift.
In FX stay long GBP, short commodity currencies and the YEN. In risk begin to think about booking long profits.
I foresee crude consolidating at these levels for the next 2/3 weeks which will have a short term negative bias on risk. This period should therefore be used to start a slow accumulation on any meaningful dips prior to crude resuming its ascendency towards the $40's level.
 
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Stay nimble. Good luck trading.

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