Weekly Fundamentals - 19 March 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote:
"I continue to believe that crude is the main driver of risk at this stage. the recent crude rally is due for a consolidation/short term correction and envisage the low 30's being re-visited over the next few weeks prior to a resumption of the rally to the mid 40's by the middle of the year.
This will adversely affect risk as measured by the SP500 at least in the short term.
Gold is looking heavy, heavy to the extent that a good sized fall of $100-150 fall is a definite possibility in the short term.
The US30 year bond remains a sell.
On the FX side COT is telling us clearly that the USD as measured by the USD Index is headed higher in the short term. It will try but most likely fail to make new highs before resuming its downward trajectory.
Therefore for next week continue to reduce risk on any further move higher, short gold, buy the USD against the commodity currencies and short YEN."
 
Now let us see how we fared on our trade recommendations.
We got our crude trade wrong. It continued to rally post the $40 level. This affected risk as measured by the S&P500 positively which also closed the week strong near its highs.
Irrespective of gold's wild volatility it did absolutely nothing on the week closing virtually unchanged.
We were also wrong in our US30 year bond recommendation as it rallied.
Our view on the USD Index was also incorrect as it fell hard against all the currencies.
 
In summary, not a good week. We only marginally got our gold recommendation right. Remember however that our MACRO fundamental recommendations are not to be used for short term day trading. All our recommendations need to be viewed over a number of weeks.
 
This is a very light week in terms of data so COT is vitally important as always.

USD: The US$ Index fell meaningfully on the week.
A very light week in terms of data.
On Wednesday we have Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims number and Core Durable Goods Orders.
COT data shows that large commercials continue to reduce their net short position in the US$ Index from -30,119 to -21,645. This is a 52 week rolling extreme. We therefore alter our view from SLIGHTLY BULLISH to BULLISH.
 
EURO: The EURO rose strongly against the USD last week.
Only one item for the EURO this week which is the German Business Climate figure on Tuesday forecasted to be 106.1 from last month's 105.7.
COT data for the Euro shows that large commercials very slightly reduced their net long position from +89,999 to +87,813. We remain NEUTRAL.
 
GBP: The GBP rose meaningfully against the USD last week.
Two items for the GBP this week.
On Tuesday we have the CPI number which is expected to rise marginally from 0.3% to 0.4%.
On Thursday we have Retail Sales.
COT shows that large commercials decreased their net long position meaningfully from +72,682 to +38,929. We therefore alter our view from BULLISH to NEUTRAL.
 
YEN: The YEN rose meaningfully against the USD this week.
Only one item for the YEN which takes place on Thursday when we have Tokyo Core CPI.

COT data shows that large commercials reduced their net short position from -65,310 to -46,976. We remain BEARISH.
 
AUD: The AUD rose against the USD last week.
Only one data item this week for the AUD which takes place on Tuesday when the RBA Governor speaks.

COT data shows that large commercials reduced their net short position from -33,359 to -22,868. This is the fourth time in 52 weeks that they are net short and remains close to their biggest short position over the last year. We therefore remain BEARISH.
 
CNY: There is no data for the CNY this week.
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 reduced their net short from -84,459 to -52,511. We remain NEUTRAL.
GOLD: Large commercials slightly reduced net short position from -195,372 to -185,531. Now that large commercials hold a net short position which is greater than 100,000 we are bearish. We therefore remain SUPER BEARISH.
SILVER: Large commercials very slightly reduced their net short position from -70,815 to -70,024. We therefore remain BEARISH.
 
The gold:silver ratio narrowed from 80.81 to 79.48 indicating strong silver outperformance for the week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials substantially continue to decrease their net long position from +3,656 to +1,110. Large commercials generally carry a net neutral position which their current position now reflects. We therefore remain NEUTRAL.
US 30 YEAR BOND: Large commercials continue to increase their net short position from -58,590 to -60,280. This is a 52 week rolling extreme. We therefore remain VERY BEARISH.
CRUDE OIL: Large commercials increased their net short position from -241,089 to -267,737. This is the third week in succession that they have increased their net short position so we alter our view from BULLISH to NEUTRAL.
CAN$: Large commercials continue to decrease their net long position from +27,220 to +17,153. This is the 7th week in a row that they decrease their not long position so we therefore remain SLIGHTLY BEARISH.
NZD: Large commercials continue to decrease their net long position from +2,225 to +285. They are essentially flat. We therefore remain SLIGHTLY BEARISH.
NASDAQ100: Large commercials moved from a net short position to a net long positionwhich is only the third time they have done so over the last 52 weeks. Their position changed from -2,622 to +7,465. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.

THOUGHTS FOR NEXT WEEK
Last week was not a good one for our recommendations.
However bear in mind that the COT report will never ever give us the timing, it gives us the direction of how large commercials perceive how the products they trade/use in their business will behave over the next few weeks.
The large commercials are very rarely wrong.
 
Recommendations for next week:
Buy USD against YEN, AUD, CAN$, NZD.
Stay flat in GBP and EURO.
Sell gold and to a lesser extent silver.
Sell 30year bond.
Buy risk.
 
 
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Stay nimble. Good luck trading.

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