Weekly Fundamentals - 11 September 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"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."
 
Now let's see how we fared on our recommendations:
Selling of precious metals was very slightly wrong in terms of gold and correct in terms of silver.
Buying the GBP was slightly wrong.
Continue reducing risk was very right.
Turning bullish on copper was also the correct call.
Recommended watching the US 30 Year Bond at this stage dependent upon changes in COT findings.
 
A good week.
 
A very busy week for everything we follow especially for the GBP.
 
USD:The US$ Index fell last week but closed meaningfully off its lows.
Wednesday sees the release of Crude Oil Inventories.
Thursday is a busy day.
We start with Core Retail sales which excludes automobiles expected to rebound from -0.3% to 0.3%. Retail sales on the other hand which includes automobiles is thought to fall from 0.0% to -0.1%.
We next have PPI estimated to make a strong rebound from -0.4% to 0.1%.
We then have the Fed Manufacturing Index which is anticipated to virtually half from 2.0% to 1.1%.
Finally we have the customary Unemployment Claims figure estimated to be 262,000 from the previous 259,000.
On Friday we have both Core CPI and CPI. The former excludes food and energy and should rise from 0.1% to 0.2% whilst the latter is thought to be 0.1% from last month's 0.0%.
We finish with Consumer Sentiment estimated to be 91.0 from the previous 89.8.
COT data shows that large commercials slightly increased their net short position in the US$ Index from -20,423 to -22,910. We therefore remain BULLISH.
 
EURO:The EURO rose against the USD last week.
Two items for the EURO both on Tuesday.
The ECB President speaks and we have German Economic Sentiment which is expected to make a strong bounce from 0.5 to 2.8.
COT data for the Euro shows that large commercials increased their net long position from +100,808 to +113,340. We remain BULLISH.
 
GBP:The GBP fell slightly against the USD last week. The GBP continues to trade close to a 30 year low against the USD.
A busy week for the GBP.
We start on Tuesday with CPI expected to rise from 0.6% to 0.7%.
On Wednesday we have The Average Earnings Index thought to fall from 2.4% to 2.1%. This is followed by the Claimant Count Change which is estimated to rise from -8,600 to +1,700.
Thursday is the big day when we start with Retail Sales expected to fall from 1.4% to -0.4%.
We then have the MPC Official Bank Rate Votes expected at 0-0-9 from the previous 0-9-0. This is followed by the Official bank Rate expected to remain unchanged at 0.25% and the Monetary Policy Summary.
COT data shows that large commercials decreased their net long position from +114,454 to +103,984. As this is continues to be a 52 week extreme we remainVERY BULLISH.
 
YEN:The YEN rose against the USD last week.
Only one item for the YEN which is the Manufacturing Index on Monday. It is expected to be better than last month at -6.5 from -11.1.
COT data shows that large commercials decreased their net short position from -57,204 to -49,904 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD:The AUD fell against the USD last week.
Two items for the AUD both on Wednesday.
We have the Unemployment Change anticipated to be 15,200 from the previous 26,200 and the Unemployment rate figure expected to remain unchanged at 5.7%.
COT data shows that large commercials slightly decreased their net short position from -47,061 to -43,568 last week. We therefore remain BEARISH.
 
CNY:Two items for the CNY this week.
On Monday we have Industrial Production expected to rise from 6.0% to 6.2% and Fixed Asset Investment thought to decline from 8.1% to 7.9%.
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 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.

RISK:
S&P500: Large commercials decreased their net short position from -80,999 to -64,778 last week. We therefore alter our view from BEARISH to SLIGHTLY BEARISH.
RUSSELL2000:Large commercials slightly increased their net short from -25,342 to -26,569 last week. This is the sixth time that large commercials are net short in 52 weeks and it is an extreme. We therefore remain BEARISH.
NASDAQ100:Large commercials decreased their net short position from -150,278 to -144,588. This continues to remain at a 52 week extreme. We therefore remain VERY BEARISH.
 
COMMODITIES:
GOLD: Large commercials increased their net short position from -301,213 to -329,973 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 increased their net short position from -95,678 -99,582 last week. We therefore remain VERY BEARISH.
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net long position from +20,538 to +28,972 last week. Large commercials generally carry a net neutral position. We therefore remain BULLISH.
CRUDE OIL: Large commercials decreased their net short position from -336,564 t0 m-288,667 last week. We therefore remain alter our view from BEARISH to NEUTRAL.
 
The gold:silver ratio decreased from 68.22 to 69.77 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials decreased their net short position from -41,149 to -33,972 last week. We therefore remain alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: Large commercials decreased their net short position from -34,035 to -30,005 last week. We therefore remain BEARISH.
NZD: Large commercials substantially increased their net short position from -3,534 to -7,911 last week. We therefore alter our view from SLIGHTLY BEARISH to BEARISH.

THOUGHTS FOR NEXT WEEK
There are a number of changes to COT that have resulted in us making a few recommendation changes.
Generally speaking the markets have not been able to break out of their ranges over the summer months with the exception of the GBP which has not recovered by any meaningful manner its losses due to BREXIT.
Now that summer is coming to an end we can expect to see this happen and not perhaps in the recent direction.
Therefore, even though it may be against general market consensus (or precisely because of it) we are happy to follow COT which means we will on many occasions trade against the herd.

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