Weekly Fundamentals - 20 August 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"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$."
 
Now let's see how we fared on our recommendations:
The selling of precious metals was very marginally wrong in the case of gold and meaningfully correct in terms of silver.
Accumulating the EURO was a very good recommendation.
Buying the GBP was also correct as it bounces from its 31 year low.
Reducing risk exposure was very marginally correct.
Being wary of the YEN at these elevated levels was wrong. The YEN rallied to slightly higher elevated levels.
Remain watchful of the CAN$ meant exactly that. Just watch it.
 
All in all a good week.
 
A very quiet week in terms of data so COT changes are even more important.
 
USD: The US$ Index fell meaningfully last week.
We start on Wednesday with the Crude Oil Inventories number.
On Thursday we have Core Durable Goods Orders which excludes transportation orders and is expected to bounce meaningfully from -0.4% to 0.4%.
This is followed by the usual Unemployment Claims figure which is estimated to rise slightly from 262,000 to 265,000.
On Friday we see the GDP number thought to be 1.1% from the previous 1.2% and the FED Chairperson speaking.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -21,617 to -21,085. We therefore remain BULLISH.
 
EURO: The EURO rose well against the USD last week.
There is only one item for the EURO this week.
On Thursday we have German Business Climate figure which is anticipated to rise from 108.3 to 108.5.
COT data for the Euro shows that large commercials decreased their net long position from +119,514 to +108,405. We remain BULLISH.
 
GBP: The GBP rose against the USD last week. The GBP continues to trade at a 30 year low against the USD.
There is only one item for the GBP this week.
On Friday we have the GDP figure thought to fall slightly from 1.2% to 1.1%.
COT data shows that large commercials marginally increased their net long position from +110,591 +117,165. As this is continues to be a 52 week extreme we remain VERY BULLISH.
 
YEN: The YEN rose against the USD last week.
We start on Monday with Manufacturing PMI which is expected to remain below the 50 level at 49.5.
On Tuesday the BOJ Governor speaks.
On Thursday we have National Core CPI which excludes fresh food and is expected to improve marginally from -0.5% to -0.4%.
COT data shows that large commercials increased their net short position from-45,724 to -52,916 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD: The AUD fell against the USD last week.
There are no items of note for the AUD this week.
COT data shows that large commercials increased their net short position from -42,396 to -50,856. We therefore remain BEARISH.
 
CNY: There is only one item for the CNY this week.
On Tuesday we have the release of the CB Leading Index which measures the change in the level of a composite index based on 8 economic indicators.
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 increased their net short position from -60,264 to -95,788 last week. We therefore alter our view from NEUTRAL to BEARISH.
RUSSELL2000: Large commercials increased their net short from -5,609 to -10,506 last week. This is the third time that large commercials are net short in 52 weeks. We therefore remain BEARISH.
NASDAQ100: Large commercials very slightly decreased their net short position from -136,731 to -131,650. This is the sixth 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 -312,941 to -310,993 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 -103,311 to -100,594 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 increased their net long position from +2,715 to +3,820 last week. Large commercials generally carry a net neutral position. We therefore remain NEUTRAL.
CRUDE OIL: Large commercials increased their net short position from -258,207 to -292,429 last week. We therefore remain BEARISH.
 
The gold:silver ratio increased from 68.01 to 69.67 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials marginally decreased their net short position from -69,338 to -68,262 last week. We therefore remain NEUTRAL.
 
OTHER FX:
CAN$: Large commercials increased their net short position from -15,537 to -22,766 last week. We therefore alter our view from NEUTRAL back to BEARISH.
NZD: Large commercials slightly decreased their net short position from -1,180 -1,044 last week. We therefore remain SLIGHTLY BEARISH.

THOUGHTS FOR NEXT WEEK
Our thoughts continue in the similar vein.
Now that all of our indictors regarding risk are in negative territory we must remain bearish.
Our attitude towards precious metals remains intact: short term bearish.
Our currencies anomaly whereby we remain bullish both USD as well as the EURO and the GBP can perhaps be explained by our bearishness towards the YEN as well as the commodity based currencies.
 
Therefore our recommendations for next week are:
Continue selling precious metals
Continue accumulating the Euro
Buy GBP
Continue reducing risk
Remain cautiously bullish towards the USD versus the YEN, CAN$, AUD and marginally against the NZD.
 
Remember the saying 'A rising tide lifts all boats.'
The opposite is therefore also true.
 
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Stay nimble. Good luck trading.

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