Weekly Fundamentals - 26 March 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote:
"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."
 
Now let us see how we fared on our trade recommendations.
Our FX recommendations were mixed. We got the YEN, AUD and CAN$ trades right. The NZD was marginally higher whilst our view to stay flat in GBP and EURO should have been a recommendation to sell. So we got 50% correct.
We were spot on for both gold and silver with gold bearing the brunt of the decline.
Our recommendation to sell the 30 year bond was a reasonable one as it fell marginally.
 
A much better week than the previous one.
 
Due to the shortened week due to Easter holidays data this week only affect 4 of the products we follow, however as the week is the first one of the month we therefore have the all important employment data in The USA.
 
 
USD: The US$ Index rose meaningfully on the week.
A busy week in terms of data.
We start on Tuesday with Consumer Confidence which is thought to rise from 92.2 to 93.9. This is followed by the FED Chairperson speaking.
On Wednesday we have the SFP NonFarm Employment Change. This excludes both farm and government appointments. It is expected to fall from 214,000 to 194,000.
On Thursday we have the customary Unemployment Claims number which is estimated to rise from 265,000 to 269,000.
Friday is the big day.
We start with Average Hourly Earnings which is anticipated to move from a negative -0.1% to a positive +0.3%. We then have the NonFarm Employment Change which is thought to fall from 242,000 to 208,000. The Unemployment rate is expected to remain unchanged at 4.9%.
Finally we have Manufacturing PMI which forecasted to show growth at 50.8 from the previous 49.5. Remember a figure above 50 indicates growth whilst below contraction.
COT data shows that large commercials continue to reduce their net short position in the US$ Index from -21,645 to -21,284. This is a 52 week rolling extreme. We therefore remain BULLISH.
 
EURO: The EURO declined against the USD last week.
There is no data of importance for the EURO this week.
COT data for the Euro shows that large commercials reduced their net long position from +87,813 to +73,024. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH.
 
GBP: The GBP declined meaningfully against the USD last week.
Three items for the GBP this week.
On Thursday the Governor of the BOE speaks and we have the Current Account figure which is expected to continue to be negative at -21.8B from last month's -17.5B.
On Friday we have Manufacturing PMI which is expected to rise from 50.8 to 51.3.
COT shows that large commercials increased their net long position meaningfully from +38,929 to +59,790. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
YEN: The YEN fell meaningfully against the USD this week.
There are four data points for the YEN this week.
On Monday we have Household Spending which is thought to improve from last month's -3.1% to -1.8%. This is followed by Retail sales expected to make good progress from -0.2% to +1.6%.
On Thursday we have both the Manufacturing Index and Non-Manufacturing Index numbers. The former is expected to fall to 8 from 12 and the latter from 25 to 23.
COT data shows that large commercials increased their net short position from -46,976 to -57,511. We remain BEARISH.
 
AUD: The AUD fell against the USD last week.
There is no data for the AUD this week.
COT data shows that large commercials increased their net short position from -22,868 to -31,481. This is the fifth 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 one item for the CNY this week.
On Thursday we have Manufacturing PMI which is expected to rise slightly from 49 to 49.3.
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 substantially changed their position moving from a net short of -52,511 to a huge net long of +227,812. This is a massive swing and is now a 52 week rolling high. We therefore have to alter our view from NEUTRAL to SUPER BULLISH.
GOLD: Large commercials slightly increased net short position from -185,531 to -199,994. Now that large commercials hold a net short position which is greater than 100,000 we are bearish, in fact it is nearly 200,000 and a 52 week rolling extreme. We therefore remain SUPER BEARISH.
SILVER: Large commercials increased their net short position from -70,024 to -77,242. This is a 52 week rolling extreme. We therefore alter our view from BEARISH to SUPER BEARISH.
 
The gold:silver ratio narrowed from 79.48 80.01 indicating marginal silver underperformance for the week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials substantially switched from a net long position of +1,110 to a net short of -1,037. 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 -60,280 to -64,516. This is a 52 week rolling extreme. We therefore remain VERY BEARISH.
CRUDE OIL: Large commercials increased their net short position from -267,737 to -296,929. This is the fourth week in succession that they have increased their net short position so we remain NEUTRAL.
CAN$: Large commercials continue to decrease their net long position from +17,153 to +9,659. This is the 8th week in a row that they decrease their not long position so we alter our view from SLIGHTLY BEARISH to BEARISH.
NZD: Large commercials switched from a net long position of +285 to a net short of -1,453. We therefore alter our view from SLIGHTLY BEARISH to BEARISH.
NASDAQ100: Large commercials moved from a net long position of +7,465 to a small net short position of -5,598. We therefore alter our view from SLIGHTLY BULLISH to NEUTRAL.
RUSSELL2000: This week we are adding the RUSSELL2000 to the products we analyze using COT. The reason for this is that the 2,000 companies that form this index are those companies outside of the SP500 and derive the majority of their earnings domestically in The USA. They are the backbone of the domestic American economy and therefore a very good leading indicator of the state of the economy. Remember that the SP500 companies are by and large the largest companies in the world. They trade internationally and derive a great deal of their income from their international operations.
Large commercials slightly reduced their net long position from 64,900 to 63,561. This remains very close to the 52 week rolling extreme of +69,575 and we therefore instigate our analysis with a BULLISH recommendation.

THOUGHTS FOR NEXT WEEK
Recent economic data from The USA and COT show clear strength. We therefore cannot be bearish on risk. We also therefore cannot be bullish in the short term on precious metals.
Whilst we still anticipate crude rallying to the $60's level this year it will undergo a correction from now onwards.
Pay more attention to the Hourly earnings figure than the NonFarm Payroll figure this Friday and any outperformance by the RUSSELL2000 (which is a leading indicator) over the SP500 (which is a lagging indicator) is a sure sign that risk is a buy on dips.
 
Recommendations for next week:
Continue buying the USD against YEN, AUD, CAN$, NZD.
Buy GBP.
Sell gold and to a lesser extent silver which should relatively outperform as its industrial qualities overcome its precious metal attributes.
Continue selling the 30year bond.
Buy risk as measured by the SP500 on dips.
 
For timely, accurate trade signals follow our STTS service.
For those who want to join the lucky ones receiving real time, accurate and 100% honest and transparent trade signals visit and subscribe here.

Stay nimble. Good luck trading.

CHECK OUR INTERACTIVE ECONOMIC CALENDAR FOR FULL LIST OF UPCOMING DATA RELEASES

DISCLAIMER
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Users acknowledge and agree to the fact that, by its very nature, any investment in CFDs and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.
Any recommendation, opinion or advice contained in such material reflects the views of TFF, and TFF expressly disclaims any responsibility for any decisions or for the suitability of any security or transaction based on it. Specifically, any decisions you may make to buy, sell or hold a security based on such research will be entirely your own and not in any way deemed to be endorsed or influenced by or attributed to TFF.
Past performance should not be seen as an indication of future performance. Market and exchange rate movements may cause the value of your investment to rise or fall and an investor may not get back the amount invested.
Investors considering opening a self-trading account should limit their exposure to maximum 10% of their investment capital.
Investments are not obligations of, deposits in, insured or guaranteed by TFF.