Weekly Fundamentals - 01 April 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote:
"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."
 
Now let us see how we fared on our trade recommendations.
Our call that the USD would be stronger against the YEN, AUD, CAN$, NZD proved incorrect as it fell against them all.
Our call to continue buying GBP was correct.
Our call on precious metals was marginally wrong in both cases.
Selling the US30year bond was also incorrect.
Buying risk as measured by the SP500 proved salient.
 
A poor week after a stellar previous one.
 
The week is relatively busy in terms of data with a major item for all the products we follow with exception of the CNY.
 
USD: The US$ Index fell meaningfully on the week.
A reasonably busy week in terms of data.
On Wednesday we have Crude Oil Inventories and the important FOMC Meeting Minutes.
On Thursday we have the usual Unemployment Claims number expected at 271,000 from the previous 276,000.
More importantly the FED Chairperson speaks
COT data shows that large commercials continue to reduce their net short position in the US$ Index from -21,284 to -20,855. This is a 52 week rolling extreme. We therefore remain BULLISH.
 
EURO: The EURO rose meaningfully the USD last week.
There is only one data point of importance for the EURO this week.
On Thursday the ECB President speaks.
COT data for the Euro shows that large commercials continue to reduce their net long position from +73,024 to +67,351. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP rose against the USD last week.
Three items for the GBP this week.
On Monday we have Construction PMI expected to rise very marginally from 54.2 to 54.3.
Tuesday sees the release of Services PMI thought to show a meaningful rise from 52.7 to 53.9.
Finally on Friday we have the Manufacturing Production figure thought to decline to -0.1% from last month's positive 0.7%.
COT shows that large commercials very slightly increased their net long position from +59,790 to +60,506. We therefore remain SLIGHTLY BULLISH.
 
YEN: The YEN rose against the USD this week.
There is one data point for the YEN this week.
On Thursday we have the Current Account figure which is expected to rise from 1.48T to 1.57T.
COT data shows that large commercials increased their net short position from -57,511 to -59.963. We remain BEARISH.
 
AUD: The AUD rose against the USD last week.
A busy week for the AUD.
On Monday we have Building Approvals which is expected to rise substantially from last month's -7.5% to 2.1%. This is followed by Retail Sales which is thought to increase marginally from 0.3% to 0.4%.
On Tuesday we have the Cash Rate expected to remain at 2.0%. This is the interest rate charged on overnight loans between financial intermediaries.
Finally we have the important RBA Rate Statement.
COT data shows that large commercials increased their net short position from -31,481 to -35,765. This is the sixth time in 52 weeks that they are net short and is now 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 slightly reduced their huge net long position of +227,812 to +180,079. This remains close to the 52 week rolling high. We therefore remain SUPER BULLISH.
GOLD: Large commercials continue to increase net short position from -199,994 to -207,964. Now that large commercials hold a net short position which is greater than 100,000 we are bearish, in fact it is now greater than 200,000 and continues to be a 52 week rolling extreme. We therefore remain SUPER BEARISH.
SILVER: Large commercials decreased their net short position from -77,242 68,104. This remains close to a 52 week rolling extreme. We therefore remain SUPER BEARISH.
 
The gold:silver ratio widened from 80.01 to 81.19 indicating silver underperformance for the week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials switched from a net short position of -1,037 to a net long of + 3,465. Large commercials generally carry a net neutral position which their current position continues to now reflect. We therefore remain NEUTRAL.
US 30 YEAR BOND: Large commercials continue to increase their net short position from -64,516 to -80,743. This is a huge 52 week rolling extreme. We therefore alter our view from VERY BEARISH to SUPER BEARISH.
CRUDE OIL: Large commercials increased their net short position from -296,929 to -305,050. This is the fifth 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 +9,659 to +3,659. This is the 9th week in a row that they decrease their not long position so we remain BEARISH.
NZD: Large commercials increased their net short from -1,453 to -1,657. We therefore remain BEARISH.
NASDAQ100: Large commercials substantially increased their net short position from -5,598 to -23,554. As this is not at an extreme we remain NEUTRAL.
RUSSELL2000: Large commercials slightly increased their net long position from 63,561 to 64,999. This remains very close to the 52 week rolling extreme of +69,575 and we therefore remain BULLISH.

THOUGHTS FOR NEXT WEEK
COT data predicts market direction, it does not however predict when a directional change will take place.
An extreme reading can always and in many cases it does, move to a greater extreme reading.
The more extreme a situation becomes the greater the likelihood is that when it reverses it will do so extremely and overshoot in the opposite direction from which it came before reverting to the long term mean.
This is the situation we now have in a number of the products we follow.
 
Glaring negative extremes are evident in the US30 year bond, gold and silver and the AUD.
Positive extremes persist for the S&P500, USD Index and the RUSSELL2000.
 
Recommendations for next week:
Continue buying the USD against YEN, AUD, CAN$, NZD.
Sell gold and to a lesser extent silver.
Continue selling the 30year bond.
Buy risk as measured by the SP500 on dips.
 
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Stay nimble. Good luck trading.

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