Weekly Fundamentals - 17 September 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"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."
 
Now let's see how we fared on our recommendations:
Selling precious metals was a very good call
Buying the GBP was absolutely not the correct call
Continue reducing risk was slightly wrong
Bullish on copper proved to be correct
Turning cautiously bullish on the US 30 Year Bond was slightly premature
Crude oil did very little on the week.
 
An average week.
 
A quiet week with all attention focused on the FOMC.
 
USD:The US$ Index rose strongly last week closing on its high.
We start on Tuesday with Building Permits expected to be 1.17M from the previous 1.14M.
Wednesday is a busy day.
We start with Crude Oil Inventories.
We then have the FOMC Economic Projections, the FOMC Statement, the FED Funds Rate expected to remain unchanged at 0.50% and finally the important FOMC Press Conference.
On Thursday we have the customary Unemployment Claims number expected to remain virtually the same as last week at 261,000.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -22,910 to -22,546. We therefore remain BULLISH.
 
EURO:The EURO fell against the USD last week and closed on its lows.
There is only one item for the Euro this week which is the ECB President speaking on Thursday.
COT data for the Euro shows that large commercials decreased their net long position from +113,340 to +103,223. We remain BULLISH.
 
GBP:The GBP fell heavily against the USD last week. The GBP continues to trade close to a 30 year low against the USD.
There is nothing of note for the GBP this week.
COT data shows that large commercials decreased their net long position from +103,984 to +101,050. As this continues to be close to a 52 week extreme we remain VERY BULLISH.
 
YEN:The YEN fell very slightly against the USD last week.
On Tuesday we have the Monetary Policy Statement.
On Wednesday we have the BOJ Press Conference.
COT data shows that large commercials increased their net short position from -49,904 to -50,204 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD:The AUD fell against the USD last week.
Two items for the AUD this week.
On Monday we have the Monetary Policy Meeting Minutes.
On Tuesday we have the release of the Mid Year Economic and Fiscal Outlook.
COT data shows that large commercials decreased their net short position from -43,568 to -37,882 last week. We therefore remain BEARISH.
 
CNY:There is no data of note 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 increased their net short position from -64,778 to -76,900 last week. We therefore alter our view from SLIGHTLY BEARISH to BEARISH.
RUSSELL2000: Large commercials significantly decreased their net short from -26,569 to -8,884 last week. We therefore alter our view from BEARISH to NEUTRAL.
NASDAQ100: Large commercials decreased their net short position from -144,588 to -100.401 last week. We therefore alter our view from VERY BEARISH to NEUTRAL.
 
COMMODITIES:
GOLD: Large commercials slightly decreased their net short position from -329,973 to -311,371 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 slightly decreased their net short position from -99,582 to -96,675 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 long position from +28,972 to +24,882 last week. Large commercials generally carry a net neutral position. We therefore remain BULLISH.
CRUDE OIL: Large commercials increased their net short position from -288,667 to -308,955 last week. We therefore remain NEUTRAL.
 
The gold:silver ratio decreased from 69.77 to 69.83 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials significantly decreased their net short position from -33,972 to -15,925 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: Large commercials significantly decreased their net short position from -30,005 to -18,511 last week. We therefore alter our view from BEARISH to NEUTRAL.
NZD: Large commercials slightly decreased their net short position from -7,911 to -7,466 last week. We therefore remain BEARISH.

THOUGHTS FOR NEXT WEEK
There are a number of changes to COT that have resulted in us making a few recommendation changes.
Whilst we have been bullish on the USD Index we are beginning to see slight changes not necessarily in currencies that form part of that index but in the more major commodity currencies for instance the AUD and the CAN$.
Our thoughts for the last couple of weeks regarding the US 30 Year Bond are beginning to materialise.
GBP has been disappointing to say the least. It closed very weak at its lows and whilst COT indicate it is a buy, its inability to stage any form of meaningful bounce does not bode it well.
Our view on the precious metals has been correct and whilst it should remain correct we begin to start reflecting when to start playing both gold and silver from the long side.

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