Weekly Fundamentals - 27 August 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"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."
 
Now let's see how we fared on our recommendations:
Selling precious metals was a good call.
Continue accumulating the EURO was not good as it edged lower.
Buying the GBP was very good.
Continue to reduce risk was also good.
Remaining cautiously bullish towards the USD against the YEN, CAN$, AUD and NZD was wise as all of those currencies moved marginally lower against the USD.
 
All in all a reasonable week.
 
As this week is the first week of the month and therefore the first Friday of the month we have the NonFarm Payroll data to look forward to. Otherwise the week is relatively data light.
 
USD: The US$ Index rose well last week.
We start on Tuesday with Consumer Confidence which is expected to fall slightly from 97.3 to 97.2.
On Wednesday we have Crude Oil Inventories and ADP NonFarm Employment Change which unlike the Friday figure also excludes government hirings. It is thought to decrease slightly from 179,000 to 173,000.
Thursday sees the usual Unemployment Claims figure and Manufacturing PMI.
Friday is the big day with Average Hourly Earnings, NonFarm Payroll and the Unemployment Rate.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -21,085 to -20,859. We therefore remain BULLISH.
 
EURO: The EURO fell against the USD last week.
There are no newsworthy items for the EURO this week.
COT data for the Euro shows that large commercials decreased their net long position from +108,405 to +91,174. We remain BULLISH.
 
GBP: The GBP rose against the USD last week. The GBP continues to trade close to a 30 year low against the USD.
A couple of items for the GBP this week.
On Thursday we have Manufacturing PMI expected to rise from 48.2 to 49.1.
On Friday we have Construction PMI expected to be xxx from the previous month's 45.9.
COT data shows that large commercials marginally decreased their net long position from +117,165 to +114,580. As this is continues to be a 52 week extreme we remain VERY BULLISH.
 
YEN: The YEN fell against the USD last week.
We start on Monday with Household Spending thought to rise from -2.2% to -1.3%.
This is followed on Wednesday by Capital Spending estimated to be 5.6% from the previous 4.2%.
COT data shows that large commercials increased their net short position from -52,916 to -56,237 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD: The AUD fell against the USD last week.
There are three items of note for the AUD this week.
We start on Monday with Building Approvals anticipated to make a big jump from -2.9% to 1.2%.
On Wednesday we have Private Capital Expenditure expected to improve marginally from -5.2% to -4.0% and Retail Sales also anticipated to improve from 0.1% to 0.3%.
COT data shows that large commercials very slightly increased their net short position from -50,856 to -49,989 last week. We therefore remain BEARISH.
 
CNY: There are two items for the CNY both on Wednesday.
Manufacturing PMI is expected to remain unchanged at 49.9 and Non Manufacturing PMI is thought to be xxx from the previous 53.9.
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 increased their net short position from -95,788 to -102,474 last week. We therefore remain BEARISH.
RUSSELL2000: Large commercials significantly increased their net short from -10,506 to -18,505 last week. This is the fourth time that large commercials are net short in 52 weeks and it is an extreme. We therefore remain BEARISH.
NASDAQ100: Large commercials very slightly increased their net short position from -131,650 to -132,141. This is the seventh 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 increased their net short position from -310,993 to -317,475 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 -100,594 to -98,069 last week. We therefore remain VERY BEARISH.
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net long position from +3,820 to +2,137 last week. Large commercials generally carry a net neutral position. We therefore remain NEUTRAL.
CRUDE OIL: Large commercials substantially increased their net short position from -292,429 to -343,548 last week. We therefore remain BEARISH.
 
The gold:silver ratio increased from 69.67 to 70.80 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials marginally increased their net short position from -68,262 to -73,219 last week. We therefore remain NEUTRAL.
 
OTHER FX:
CAN$: Large commercials substantially increased their net short position from -22,766 to -31,617 last week. We therefore remain BEARISH.
NZD: Large commercials decreased their net short position from -1,044 to -617 last week. We therefore remain SLIGHTLY BEARISH.

THOUGHTS FOR NEXT WEEK
All of our indictors regarding risk remain in negative territory so we must therefore remain bearish.
Our attitude towards precious metals remains intact. We remain bearish.
We have been watching the CAN$ closely. We now recommend shorting it.
Crude is now once again looking interesting from the short side.
Our favourite trade continues to be long GBP.
 
Therefore our recommendations for next week are:
Continue selling precious metals
Continue buying the GBP
Continue reducing risk
Remain bullish towards the USD especially against the CAN$ and the YEN.
 
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