Weekly Fundamentals - 04 September 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"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."
 
Now let's see how we fared on our recommendation:
Continued selling of precious metals was not good as gold inched higher and silver did better.
Buying of the GBP was probably the trade of the week as it rallied strongly.
Selling risk was marginally wrong.
Staying bullish the USD was on the whole correct. Against the YEN it rallied convincingly and fell very marginally against the CAN$.
 
A reasonable week.
 
After last week's flurry of excitement with the NonFarm Payroll data, this week is slightly more mundane in terms of economic data.
 
USD: The US$ Index rose last week.
We start on Tuesday with Non Manufacturing PMI thought to fall slightly from 55.5 to 55.4.
On Thursday we have the customary Unemployment Claims figure and Crude Oil Inventories.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -20,859 to -20,423. We therefore remain BULLISH.
 
EURO: The EURO fell against the USD last week.
On Thursday we have the Minimum Bid Rate which is the interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system and the important ECB Press Conference.
COT data for the Euro shows that large commercials increased their net long position from +91,174 to +100,808. We remain BULLISH.
 
GBP: The GBP rose meaningfully against the USD last week. The GBP continues to trade close to a 30 year low against the USD.
On Wednesday we have Manufacturing Production which is thought to worsen further from -0.3% to -0.4%. This is followed by the Inflation Report Hearings.

COT data shows that large commercials very marginally decreased their net long position from +114,580 to +114,454. As this is continues to be a 52 week extreme we remain VERY BULLISH.
 
YEN: The YEN fell against the USD last week.
On Sunday the BOJ Governor speaks.
On Wednesday we see the GDP number which is expected to remain at 0.0% and the Current Account number thought to fall from 1.65T to 1.59T.
COT data shows that large commercials increased their net short position from -56,237 to -57,204 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD: The AUD rose slightly against the USD last week.
A busy week for the AUD.
We start on Tuesday with the Cash Rate which is the interest rate charged on overnight loans between financial intermediaries.
This is followed by the important RBA Rate Statement.
Finally on Tuesday we have the GDP figure thought to fall from 1.1% to 0.4%.
On Wednesday we have the Trade Balance number expected to improve from -3.20B to -2.65B.
COT data shows that large commercials slightly decreased their net short position from -49,989 to -47,061 last week. We therefore remain BEARISH.
 
CNY:A busy week for the CNY.
We start on Sunday with Services PMI anticipated to rise from 51.7 to 51.9.
On Wednesday we should have the Trade Balance estimated to rise from 343B to 372B and both CPI and PPI.
CPI should fall slightly from 1.8% to 1.7% and PPI is expected to improve from -1.7% to -1.0%.
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 -102,474 to -80,999 last week. We therefore remain BEARISH.
RUSSELL2000: Large commercials significantly increased their net short from -18,505 -25,342 last week. This is the fifth time that large commercials are net short in 52 weeks and it is an extreme. We therefore remain BEARISH.
NASDAQ100: Large commercials significantly increased their net short position from -132,141 to -150,278. This is the 8th week running there is 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 -317,475 to -301,213 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 -98,069 to -95,678 last week. We therefore remain VERY BEARISH.
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials substantially increased their net long position from +2,137 to +20,538 last week. Large commercials generally carry a net neutral position. We therefore alter our view from NEUTRAL to BULLISH.
CRUDE OIL: Large commercials slightly decreased their net short position from -343,548 to -336,564 last week. We therefore remain BEARISH.
 
The gold:silver ratio decreased from 70.80 to 68.22 indicating strong silver outperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials sharply decreased their net short position from -73,219 to -41,149 last week. We therefore remain NEUTRAL.
 
OTHER FX:
CAN$: Large commercials increased their net short position from -31,617 to -34,035 last week. We therefore remain BEARISH.
NZD: Large commercials substantially increased their net short position from -617 to -3,534 last week. We therefore remain SLIGHTLY BEARISH.

THOUGHTS FOR NEXT WEEK
There is little in the way of changes in the COT findings with the exception of Copper and the US 30 Year Bond.
In the former's case we are interested on the long side now whilst the latter we are beginning to like but only from a distance. We will wait and see what next week's COT findings are.
Otherwise it is much of the same: wary of risk, like the GBP, do not like precious metals.

Therefore our recommendations for next week are:
Continue selling precious metals
Continue buying the GBP
Continue reducing risk
Bullish copper
Watch the US 30 Year Bond.
 
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