Weekly Fundamentals - 06 August 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 

In conclusion to our report last week we wrote:
"All our indictors regarding risk are now in negative territory so we must therefore turn outright bearish on risk.
We continue to stay bearish on the precious metal sector but that is beginning to slightly ease as we may be beginning to see large commercials reduce their long USD position in favour mainly of the GBP and EURO. It is a little too early to call the start of a meaningful USD correction. Perhaps next week's behaviour will help especially as we have the NonFarm Payroll data on Friday.
Otherwise the thin holiday markets will remain volatile so stay wary.
 
Therefore our recommendations for next week are:
Continue selling precious metals
Continue accumulating the Euro
Buy GBP
Continue reducing risk"
 
Now let's see how we fared on our recommendations:
Selling precious metals was a very good idea.
Accumulating the Euro was premature.
Likewise buying the GBP was wrong also.
Reducing risk was marginally wrong.
 
All in all a poor week for our recommendations.
 
After last week's busy BOE rate reduction and the NonFarm Payroll figures in the US this week is relatively quiet week in terms of meaningful data.
 
USD: The US$ Index rose meaningfully last week.
We start on Wednesday with Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims number expected to be 272,000 from the previous 269,000.
Friday is a busy day.
We start with Core Retail Sales which excludes cars and is expected to decline from 0.7% to 0.2%.
PPI is also expected to decline from 0.5% to 0.1%.
Retail Sales follows with an anticipated fall from 0.6% to 0.4%.
Finally we have Consumer Sentiment thought to rise from 90.0 to 91.5.
COT data shows that large commercials decreased their net short position in the US$ Index from -28,600 to -21,980. We therefore remain BULLISH.
 
EURO: The EURO fell meaningfully against the USD last week.
There is only one item for the EURO this week.
On Friday we have the German GDP number thought to fall from 0.7% to 0.3%.
COT data for the Euro shows that large commercials decreased their net long position from +135,735 to +119,326. We remain BULLISH.
 
GBP: The GBP fell against the USD last week. The GBP is still trading close to a 30 year low against the USD.
A quiet week for the GBP after last week's heightened volatility post the BOE rate reduction and QE expansion.
On Tuesday we have Manufacturing Production estimated to show marginal improvement from the previous -0.5% to 0.0%.
COT data shows that large commercials marginally increased their net long position from +106,742 to +107,648. As this is continues to be a 52 week extreme we remain VERY BULLISH.
 
YEN: The YEN rose against the USD last week.
Only one item for the YEN which is the Current Account number on Sunday.
COT data shows that large commercials substantially increased their net short position from -26,511 to -36,367 last week. We therefore remain NEUTRAL.
 
AUD: The AUD rose marginally against the USD last week.
Only one noteworthy item which takes place on Tuesday when the RBA Governor speaks.
COT data shows that large commercials increased their net short position from -33,827 to -36,204. We therefore remain BEARISH.
 
CNY: Two items for the CNY.
On Sunday we have the Trade Balance number which is thought to rise slightly from 311B to 313B.
Thursday sees the release of Industrial Production expected to remain at 6.2%.
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.
 
RISK:
S&P500: Large commercials substantially decreased their net short position from -153,097 to -79,048 last week. We therefore alter our view from BEARISH to NEUTRAL.
RUSSELL2000: Large commercials decreased their net long position from +4,972 and are now net short -1,552. This is the first time that large commercials are net short in 52 weeks. We therefore remain BEARISH.
NASDAQ100: Large commercials again increased their net short position from -124,568 to -134,355. This is the fourth week running of an increase in the net short position and it continues to remain at a 52 week extreme. We therefore remain VERY BEARISH.
 
COMMODITIES:
GOLD: Large commercials increased their net short position from -309,023 to -324,027 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish and as it is now once again above the 300,000 mark we continue to remain VERY BEARISH.
SILVER: Large commercials marginally increased their net short position from -107,123 to -109,121 last week. We therefore remain VERY BEARISH.
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials slightly decreased their net short position from -3,695 to -3,437 last week. Large commercials generally carry a net neutral position. We therefore remain NEUTRAL.
CRUDE OIL: Large commercials slightly decreased their net short position from -284,341 to -279,702 last week. We therefore remain BEARISH.
 
The gold:silver ratio increased from 66.55 to 67.92 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials substantially decreased their net short position from -110,458 to -69,047 last week. We therefore alter our view from BEARISH to NEUTRAL.
 
OTHER FX:
CAN$: Large commercials marginally decreased their net short position from -22,944 to -21,877 last week. We therefore remain BEARISH.
NZD: Large commercials slightly increased their net short position from -1,223 to -1,987 last week. We therefore remain SLIGHTLY BEARISH.

THOUGHTS FOR NEXT WEEK
The majority of our indictors regarding risk are now in negative territory so we must therefore remain bearish on risk.
Precious metals may have started a short term correction phase which may be short in duration but sharp in magnitude. Stay wary at these levels.
Interestingly for the first time in a while debt is starting to behave favourably and this emphasis' our bearish stance towards risk.
 
We are always early to the party and never the last to leave. This makes it imperative that position sizes are kept very small as pain will inevitably have to be borne. As the saying goes 'no pain, no gain'.
 
Therefore our recommendations for next week are:
Continue selling precious metals
Continue accumulating the Euro
Buy GBP
Continue reducing risk
Reduce shorts on any debt positions.
 

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