Weekly Fundamentals - 22 May 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"COT findings have served us well as we are making more than losing on our recommendations.
Prime examples have been our bullish stance on risk, our negative views on precious metals and our bullish view on the USD especially against the commodity currencies.
Our recommendation last week to turn bullish on the NASDAQ100 over the SP500 was again a 'good' one at least in relative terms, this week's COT findings for the NASDAQ100 proves that last week was the time to buy it.
 
This week's recommendations are by and large the same as they have been:
Buy risk in the form of NASDAQ100
Buy USD against the commodity currencies especially the CAN$
Sell the 30 year Bond
Buy Copper
Remain short the precious metals"
 
Now let us see how we fared on our trade recommendations.
Buying the NASDAQ100 was a good call. It outperformed the other risk products.
Buying the USD against the commodity currencies especially the CAN$ was absolutely brilliant.
Selling the 30 year bond was also a good call.
Buying copper was indifferent as it closed only very marginally higher.
Staying short the precious metals was also the right call.
 
An exceptional week.
 
A very quiet week in terms of data.
 
USD: The US$ Index rose sharply over the week.
On Wednesday we have Crude Oil Inventories.
Thursday sees the release of Core Durable Goods which is expected to rise by 0.3% from last month's -0.2% and the customary Unemployment Claims figure estimated to be 275,000, virtually unchanged from 278,000.
Finally on Friday we have GDP thought to rise from 0.5% to 0.8%.
Importantly the FED Chairperson speaks.
COT data shows that large commercials very slightly decreased their net short position in the US$ Index from -16,904 to -15,383. This continues to be close to a 52 week rolling extreme. We therefore remain VERY BULLISH.
 
EURO: The EURO fell sharply against the USD last week.
There are only two items for the Euro this week.
On Tuesday we have German Economic Sentiment which is expected to rise from 11.2 to 12.1.
On Wednesday we have the German Business Climate figure anticipated to remain virtually unchanged from 106.6 at 106.9.
COT data for the Euro shows that large commercials increased their net long position from +29,484 to +34,116. This remains very close to a 52 week low so we therefore remain BEARISH.
 
GBP: The GBP rose against the USD last week.
Two items for the GBP this week. Irrespective of the quantity or the importance of data, movements in the GBP will be volatile as we approach the referendum on EU membership on the 23/6.
We start on Tuesday when we have the Inflation Report Hearings.
On Thursday we have the GDP estimate which is expected to remain unchanged at 0.4%.
COT shows that large commercials increased their net long position from +55,022 to +60,935. We therefore alter our view from SLIGHTLY BULLISH to BULLISH.
 
YEN: The YEN fell against the USD last week.
Only one item for the YEN this week.
On Thursday we have Tokyo Core CPI expected to fall further from -0.3% to -0.4%.
COT data shows that large commercials very slightly decreased their net short position from -63,294 to -62,439. This remains close to a 52 week extreme and so we therefore remain VERY BEARISH.
 
AUD: The AUD continued to fall against the USD last week this is the fourth weekly fall.
On Monday the RBA Governor speaks.
On Wednesday we have Private Capital Expenditure which measures the change in the total inflation-adjusted value of new capital expenditures made by private businesses. It is expected to fall from +0.8% to -3.2%.
COT data shows that large commercials substantially decreased their net short position from -42,718 to -26,088. This is the third time in 13 weeks that the large commercials have decreased their net short position. We therefore alter our view from VERY BEARISH to BEARISH.
 
CNY: here 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 increased their huge net long position from +86,643 to +100,453 last week. We therefore remain BULLISH.
GOLD: Large commercials slightly increased their net short position from -284,996 to -290,243 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish, in fact it is near the 300,000 level and continues to be very close 52 week rolling extreme. We have to remain SUPER BEARISH.
SILVER: Large commercials very slightly decreased their net short position from -91,732 to -89,895. This continues to be a 52 week extreme and we therefore remain SUPER BEARISH.
 
The gold:silver ratio widened from 74.52 to 75.87 indicating silver underperformance last week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net long from +22,405 to +29,943 last week. Large commercials generally carry a net neutral position. This is now becoming an interesting situation on the long side so we alter our view from SLIGHTLY BULLISH to BULLISH.
US 30 YEAR BOND: Large commercials increased their net short position from -69,968 to -72,854 last week. We therefore remain BEARISH.
CRUDE OIL: Large commercials substantially increased their net short position from -291,621 to -351,429 last week. This is now a 52 week extreme and we therefore alter our view from NEUTRAL to BEARISH.
CAN$: Large commercials very slightly decreased their net short position from -33,890 to -33,527 last week. This is the 12th week that the large commercials are at a 52 week extreme. We therefore remain SUPER BEARISH.
NZD: Large commercials decreased their net short from -9,689 to -6,825 last week. This remains close to a 52 week extreme. We therefore alter our view from VERY BEARISH to BEARISH.
NASDAQ100: Large commercials increased their net long position from +10,494 to +13,810 last week. We therefore remain BULLISH.
RUSSELL2000: Large commercials increased their net long position from +46,298 to +49,160. We therefore remain SLIGHTLY BULLISH.

THOUGHTS FOR NEXT WEEK
COT findings served us beautifully last week.
We concentrate on extremes. Extremes in sentiment, COT data and the behaviour of corporate insiders.
We find that when all three are aligned then the fund management community, hedge funds and retail traders are on the other side of the trade.
This is very much the case we find today.
Everyone is bearish the USD, everyone is bearish risk and everyone is bullish the precious metals.
We are not. We are on the other side of all these extremes.
 
Therefore our recommendations for next week are:
Buy risk
Buy copper
Sell crude oil
Stay short the precious metals
Stay wary of GBP volatility but err on the side of bullishness
 
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