Weekly Fundamentals - 14 August 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 

In conclusion to our report last week we wrote:
"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.
 
Now let's see how we fared on our recommendations:
Selling precious metals was neither here nor there as both silver and gold closed the week virtually unchanged.
Buying the Euro was a very good idea.
Buying GBP was a very bad idea.
Reducing risk was marginally wrong.
Reducing shorts on bonds was also marginally wrong.
 
By and large an indifferent week.
 
A reasonable week in terms of data with a number of central bank announcements thrown in for good measure.
 
USD: The US$ Index fell last week.
We start on Tuesday with both Core CPI and CPI.  The former excludes food and energy and is expected to remain static at 0.2%. The latter is expected to decline from 0.2% to 0.0%.
These numbers are followed by Building Permits which is thought to rise marginally from 1.15M to 1.16M.
Wednesday sees the release of the Crude Oil Inventories number and the important FOMC Meeting Minutes.
Finally on Thursday we have the Fed Manufacturing Index expected to rise from -2.9 to 1.4 and the usual Unemployment Claims number estimated to rise marginally from 266,000 to 269,000.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -21,980 to -21,617. We therefore remain BULLISH.
 
EURO: The EURO rose against the USD last week.
There is only one item for the EURO this week.
On Tuesday we have German Economic Sentiment which is thought to make a strong rebound from -6.8 to 2.1.
COT data for the Euro shows that large commercials very slightly increased their net long position from +119,326 to +119,514. We remain BULLISH.
 
GBP: The GBP fell against the USD last week. The GBP continues to trade at a 30 year low against the USD.
Tuesday sees the release of CPI which should stay at 0.5%.
On Wednesday we have the Average Earnings Index anticipated top rise from 2.3% to 2.5% and the Claimant Count Change which is estimated to make a big jump from 400 to 5,200.
Finally on Thursday we have Retail Sales estimated to rise from -0.9% to 0.1%.
COT data shows that large commercials marginally increased their net long position from +107,648 +110,591. 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 GDP figure on Sunday expected to decline from 0.5% to 0.2%.
COT data shows that large commercials increased their net short position from -36,367 to -45,724  last week. We therefore change our view from NEUTRAL to SLIGHTLY BEARISH.
 
AUD: The AUD rose against the USD last week.
On Monday we have the Monetary Policy Meeting Minutes.
Wednesday we have the Employment Change figure which is estimated to rise from 7,900 to 10,200 and the Unemployment Rate anticipated to remain unchanged at 5.8%.
COT data shows that large commercials increased their net short position from -36,204 to -42,396. 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.
 
RISK:
S&P500: Large commercials decreased their net short position from -79,048 to -60,264 last week. We therefore remain NEUTRAL.
RUSSELL2000: Large commercials increased their net short from -1,552 to -5,609. This is the second time that large commercials are net short in 52 weeks. We therefore remain BEARISH.
NASDAQ100: Large commercials increased their net short position from -134,355 to -136,731. This is the fifth 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 marginally decreased their net short position from to -324,027 to -312,941 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 decreased their net short position from -109,121 to -103,311 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 -3,437 and are now net long 2,715 last week. Large commercials generally carry a net neutral position. We therefore remain NEUTRAL.
CRUDE OIL: Large commercials decreased their net short position from -279,702 to -258,207 last week. We therefore remain BEARISH.
 
The gold:silver ratio increased from 67.92 to 68.01 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials marginally increased their net short position from -69,047 to -69,338 last week. We therefore remain NEUTRAL.
 
OTHER FX:
CAN$: Large commercials decreased their net short position from -21,877 to -15,537 last week. We therefore alter our view from BEARISH to NEUTRAL.
NZD: Large commercials slightly decreased their net short position from -1,987 last to -1,180 week. We therefore remain SLIGHTLY BEARISH.

THOUGHTS FOR NEXT WEEK
Our thoughts are very similar to last week:
The majority of our indictors regarding risk continue to be 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.
The only change this week is a move from bearish to neutral in the CAN$ as well a slight deterioration in our view on the YEN.
 
Therefore our recommendations for next week are:
Continue selling precious metals
Continue accumulating the Euro
Buy GBP
Continue reducing risk
Stay wary of the YEN at these levels and watch the CAN$.
 

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