Weekly Fundamentals - 09 April 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to last week's report we wrote:
"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."
 
Now let us see how we fared on our trade recommendations.
Our call for the USD to gain against the YEN was wrong, against the AUD was right, against the CAN$ was neither here nor there and against the NZD it was right. Therefore slightly in our favour.
Selling gold and to a lesser extent was wrong on both counts.
Selling the 30 year bond was wrong.
Buying the SP500 on dips was also wrong.
 
A poor performance week.
 
A busy week for everything we follow bar the EURO and YEN where there is nothing of note economic data wise.
 
USD: The US$ Index fell on the week.
On Monday the FED is hosting an unexpected meeting to discuss interest rates. The announcement will be very closely followed.
On Wednesday we start with Core Retail Sales which excludes automobile sales. The number is expected to rise from the previous -0.1% to +0.4%. This is followed by PPI which is also expected to make a big rise from -0.2% to +0.3%. We then have Retail Sales thought to move from -0.1% to +0.1%. Finally we have the Crude Oil Inventories data.
On Thursday there is more inflation data with CPI estimated to increase from -0.2% to +0.2%. This is followed by Core CPI which excludes food and energy which the market anticipates being 0.2% from the previous 0.3%. Finally we have the customary Unemployment Claims number estimated to be 270,000 from the previous 267,000.
Finally on Friday we see Consumer Sentiment expected to be 92.3 from the previous 91.
COT data shows that large commercials very slightly increased their net short position in the US$ Index from -20,855 to -21,646. This continues to be a 52 week rolling extreme. We therefore remain BULLISH.
 
EURO: The EURO rose very slightly against the USD last week.
There is no economic data of note for the EURO this week.
COT data for the Euro shows that large commercials continue to reduce their net long position from +67,351 to +59,737. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP fell against the USD last week.
We have an important week for the GBP.
We start on Tuesday with CPI thought to remain at 0.3%.
On Thursday we have the MPC Official bank rate Votes expected at 0-0-9 meaning that all nine members will vote to keep rates unchanged.
We then have the Monetary Policy Summary and the Official Bank rate expected to remain at 0.50%.
COT shows that large commercials increased their net long position from +60,506 to +70,900. We therefore remain SLIGHTLY BULLISH.
 
YEN: The YEN rose meaningfully against the USD this week.
There is no data point for the YEN this week.
COT data shows that large commercials increased their net short position from -59.963 to 69,057. We remain BEARISH.
 
AUD: The AUD fell  against the USD last week.
Two items for the AUD.
On Wednesday we have both the Employment Change number and the Unemployment rate. The former is expected to rise by 18600 and the rate is thought to increase from 5.8% to 5.9%.

COT data shows that large commercials increased their net short position from -35,765 to 37,235. This is the seventh 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: Three items for the CNY.
On Tuesday we have the Trade Balance figure which is anticipated to fall from 210B to 203B.
On Thursday we have Industrial Production estimated to rise from 5.4% to 6.0% and the GDP number anticipated at 6.7% from last month's 6.8%.
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 +180,079 to 165,048. This remains close to the 52 week rolling high. We therefore remain SUPER BULLISH.
GOLD: Large commercials very slightly decreased net short position from -207,964 to 207,245. 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 -68,104 to -59,665. We therefore alter our view slightly from SUPER BEARISH to BEARISH.
 
The gold:silver ratio narrowed from 81.19 to 80.63 indicating 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 from +3,465 to +10,370. Large commercials generally carry a net neutral position. The fact that they are now building a net long allows us to alter our view from NEUTRAL to SLIGHTLY BULLISH.
US 30 YEAR BOND: Large commercials decreased their net short position from -80,743 to -66,832. We therefore alter our view from SUPER BEARISH to BEARISH.
CRUDE OIL: Large commercials decreased their net short position from -305,050 to -287,827. We remain NEUTRAL.
CAN$: Large commercials continue to decrease their net long position from +3,659 and are now net short at -6,488. This is the 10th week in a row that they decreased their not long position so we alter our view from BEARISH to VERY BEARISH.
NZD: Large commercials increased their net short from -1,657 To -2,793. We therefore remain BEARISH.
NASDAQ100: Large commercials continue to increase their net short position from -23,554 to -31,548. As this is not at an extreme we remain NEUTRAL.
RUSSELL2000: Large commercials slightly increased their net long position from 64,999 to 65,747. This remains very close to the 52 week rolling extreme of +69,575 and we therefore remain BULLISH.

THOUGHTS FOR NEXT WEEK
More of the same.
We cannot alter our view until and unless COT tells us to do so.
 
Therefore our recommendations for next week are:
Buy the USD against the YEN, AUD and CAN$.
Sell GOLD.
Buy the SP500 and RUSSELL2000.
 
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