Weekly Fundamentals - 04 June 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"The last few weeks have been kind to us.
Our longstanding view that the USD was a good buy and therefore risk would also catch a bid whilst bonds and commodities in the form of precious metals would not has been substantiated.
However all good trends similarly to all good things come to an end. The question is when is that?
Last week we began to get the feeling that we were approaching the change as the velocity of large commercial changes begun to wane. This week a number have actually made substansive u-turns.
Witness net shorts in the SP500 and the NASDAQ100 for the first time in a while. Witness also fairly major reductions in net shorts for both gold and silver as well as the commodity currencies.
The YEN also had a good week. This is a good bellweather for risk for where the YEN goes, risk heads in the other direction.
Transitions in trends are always difficult to call and can therefore be costly. However the more the risk the better the reward. Our recommendations this week are therefore not for the faint hearted.
 
Our recommendations for next week are therefore:
Take all profits on risk
Begin taking profits on precious metal short positions
Begin buying very slowly the AUD and NZD
Stay wary of the GBP
Short crude"
 
Now let's see how we fared on our recommendations:
Taking profits on all risk positions was an ok recommendation as risk fell marginally.
Taking profits on precious metals was absolutely the right call.
Buying the AUD and the NZD was also spot on.
Remaining wary of the GBP was correct as it fell marginally.
Short crude was a marginally good call as it fell slightly.
 
A very good week .
 
After last week's economic data activity which culminated in a horrible NonFarm Payroll number on Friday, this week is extremely quiet.
Cot data is therefore even more important.
 
USD: The US$ Index closed substantially lower last week.
On Monday the FED Chairperson speaks. It is the most important item for the week.
On Wednesday we have Crude Oil Inventories.
On Thursday we see the usual Unemployment Claims figure expected at 270,000 from last week's 267,000.
Finally on Friday we have Consumer Sentiment expected to fall slightly from 94.7 to 94.1.
COT data shows that large commercials very slightly decreased their net short position in the US$ Index from -16,147 to -16,046. This continues to be close to a 52 week rolling extreme. We therefore remain VERY BULLISH.
 
EURO: The EURO rose sharply against the USD last week.
There is only one important item for the Euro this week.
On Thursday the ECB President speaks.
COT data for the Euro shows that large commercials increased their net long position from +48,501 to + 50,714. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP fell against the USD last week.
Only one item for the GBP this week.
On Wednesday we have manufacturing Production which is expected to remain unchanged at 0.1%.
COT data shows that large commercials decreased their net long position from +54,031 to +51,984. We therefore remain SLIGHTLY BULLISH.
 
YEN: The YEN rose meaningfully against the USD last week.
There are two newsworthy items for the YEN this week.
On Tuesday we have both the Current Account number expected at 2.04T from the previous 1.89T and the GDP figure expected to rise from 0.4% to 0.5%.

COT data shows that large commercials again substantially decreased their net short position from -23,035 to -13,526. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
AUD: The AUD rose against the USD last week.
Two items for the AUD, both on Tuesday.
We start with the Cash Rate which is the rate charged on overnight loans between financial intermediaries and is expected to remain unchanged at 1.75%.
This is followed by the RBA Rate Statement.
COT data shows that large commercials decreased their net short position and are now net long moving from -26,088 to +8,618. We therefore alter our view from NEUTRAL to BULLISH.
 
CNY: Only one item for the CNY this week which is The Trade Balance number on Tuesday and is estimated to increase from 298B to 358B.
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 moved from a net short position of -11,974 to a net long of +24,250. We therefore alter our view from BEARISH back to SLIGHTLY BULLISH.
GOLD: Large commercials slightly decreased their net short position from -225,213 to -214,038 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish but it is no longer near the 300,000 mark. We therefore remain BEARISH.
SILVER: Large commercials decreased their net short position from -78,293 to -75,965. We therefore remain VERY BEARISH.
 
The gold:silver ratio widened from 74.86 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 very slightly decreased their net long from +41,785 to +41,356 last week. Large commercials generally carry a net neutral position. This therefore remains an interesting situation on the long side so we remain BULLISH.
US 30 YEAR BOND: Large commercials increased their net short position from -84,749 to -86,547 last week. This is a 52 week extreme. We therefore alter our view from BEARISH to VERY BEARISH.
CRUDE OIL: Large commercials very slightly decreased their net short position from -341,742 to -339,362 last week. This continues to be close to a 52 week extreme and we therefore remain BEARISH.
CAN$: Large commercials increased their net short position from -25,595 to -30,322 last week. We therefore remain BEARISH.
NZD: Large commercials increased their net short from -4,184 to -5,439 last week. We therefore remain BEARISH.
NASDAQ100: Large commercials substantially increased their net short position from -27,499 to -52,457. We therefore remain BEARISH.
RUSSELL2000: Large commercials increased their net long position from +25,000 to +31,164. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.

THOUGHTS FOR NEXT WEEK
The last few weeks continue being kind to us.
As stated last week spotting the change in a trend is never easy and can therefore prove to be costly.
We believe that we are at this juncture so any trade recommendation here is not for the faint hearted.
If you follow our lead do so only in a very small amount of your investable portfolio and only add to positions very marginally and incrementally.
Whilst we were right the last week a trend change is never ever linear so whilst we see no reason to materially alter our recommendations we know very well that they could prove to be premature as the markets entices more and more participants only to punish those late arrivals at least in the short term.
 
Our recommendations for next week are therefore:
If you like risk buy the SP500 and /or the RUSSELL2000. Sell the NASDAQ100
If you went long precious metals take some profits
Sell the 30 year treasury bond
Buy the AUD
Sell the CAN$
Buy YEN
Buy Copper
 
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Stay nimble. Good luck trading.

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