Weekly Fundamentals - 22 October 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report two weeks ago we wrote:
"It continues to all hinge on the USD.
We are quickly approaching the US presidential election in November. Trump seems to be determined to kill off any chance he has of winning but the closer we get to the election date the more violent the opinion poll swings will be. The USD will swing wildly in conjunction.
Which currencies will benefit the most?
It would seem that the EURO stands the best chance of benefitting.
The GBP remains problematic. COT indicates it is an absolute buy whilst the market continues to pile in on the short side. The swing when it happens will be ferocious and many will suffer deeply.
Precious metals have fallen considerably of their highs and will soon resemble value. Be patient.
 
Therefore our recommendations for next week are:
Stay wary of the USD
Buy precious metals in very small quantities
Buy GBP in very small quantities
Buy the EURO."

Now let's see how we fared on our recommendations:
The USD has climbed marginally over the two week period
Gold climbed marginally whilst silver fell marginally over the two week period
The GBP has fallen over the period
The EURO has fallen hard over the period
 
A very average fortnight.
 
A light week in terms of data.
 
USD:The US$ Index has risen marginally over the two week period.
On Tuesday we have Consumer Confidence which is expected to fall from 104.1 to 101.5.
Wednesday we have the release of Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims number estimated to rise slightly to 261,000 from 260,000 and Core Durable Goods Orders anticipated to make a strong rebound from -0.2% to 0.2%.
Finally on Friday we have GDP also thought to rise strongly from 1.4% to 2.5%.
COT data shows that large commercials have significantly increased their net short position in the US$ Index over the last two weeks from -17,908 to -51,769. We therefore alter our view from BULLISH to BEARISH.
 
EURO: The EURO fell steeply against the USD over the last two week period.
Only two items of note for the EURO this week.
On Tuesday we have the German Business Climate indicator which is expected to remain virtually unchanged at 109.6.
We also have the ECB President speaking.
COT data for the Euro shows that large commercials increased their net long position from +97,344 to +125,407 over the last two weeks are close to a 52 week rolling high. We therefore remain BULLISH.
 
GBP: The GBP fell strongly against the USD over the last two weeks. The GBP continues to trade at a 31 year low against the USD.
There are two items for the GBP this week.
On Tuesday the BOE Governor speaks.
On Thursday we have GDP expected to fall from 0.7% to 0.3%.
COT data shows that large commercials slightly decreased their net long position from +109,799 to +101,766 over the last two weeks. As this continues to be close to a 52 week extreme we remain VERY BULLISH.
 
YEN: The YEN has risen against the USD over the last two weeks.
There are two items for the YEN this week.
On Thursday we have Household Spending which is expected to improve from -4.6% to -2.6% and Tokyo Core CPI anticipated to remain at -0.5%.
COT data shows that large commercials decreased their net short position from -57,193 to -27,525 over the last two weeks. We therefore alter our view from SLIGHTLY BEARISH to NEUTRAL.
 
AUD: The AUD fell against the USD last week.
There is only one item for the AUD this week.
On Tuesday we have CPI which is estimated to be 0.5% from the previous 0.4%.
COT data shows that large commercials increased their net short position from -28,121 to -37,615 over the last two weeks. We therefore remain NEUTRAL.
 
CNY: There is nothing 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: The S&P500 has fallen over the last two weeks. Large commercials substantially increased their net short position from -38,857 to -84,773 over the last two weeks. We therefore alter our view from SLIGHTLY BEARISH to BEARISH.
RUSSELL2000: The RUSSELL2000 fell over the last two weeks. Large commercials decreased their net short from -21,827 to -13,788 over the last two weeks. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 fell marginally over the last two weeks. Large commercials increased their net short position from -139,405 to -160,550 over the last two weeks. We therefore remain BEARISH.
 
COMMODITIES:
GOLD: GOLD rose slightly over the last two weeks. Large commercials substantially decreased their net short position from -271,242 to -160,550 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish but as it is now less than the 300,000 mark we alter our view from BEARISH to NEUTRAL.
SILVER: SILVER fell marginally over the last two weeks. Large commercials decreased their net short position from -90,896 to -74,911 over the last two weeks. We therefore alter our view from VERY BEARISH to BEARISH.
COPPER: COPPER fell over the last two weeks. Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net short -952 and are now net long +8,513 over the last two weeks. Large commercials generally carry a net neutral position. This is a slightly bullish position. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
CRUDE OIL: CRUDE fell slightly over the two weeks. Large commercials increased their net short position from -356,221 to -408,739 over the last two weeks. As this is a 52 week extreme we remain BEARISH.
 
The gold:silver ratio increased from 71.78 to 72.33 indicating silver underperformance over the last two weeks.
 
DEBT:
US 30 YEAR BOND: The BOND fell over the last two weeks. Large commercials decreased their net short position from -30,565 to -6,292 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: The CAN$ rose marginally over the last two weeks. Large commercials decreased their net long position +20,364 to +15,506 over the last two weeks. We therefore remain BULLISH.
NZD: The NZD was virtually unchanged over the last two weeks. Large commercials decreased their net long position from +5,147 and are now net short -924. We therefore alter our view from BULLISH to NEUTRAL.
 
THOUGHTS FOR NEXT WEEK
Very similar thoughts to two weeks ago.
It continues to all hinge on the USD.
We are quickly approaching the US presidential election in November. Trump seems to be determined to kill off any chance he has of winning but the closer we get to the election date the more violent the opinion poll swings will be. The USD will swing wildly in conjunction.
Which currencies will benefit the most?
It would seem that the EURO stands the best chance of benefitting.
The GBP remains problematic. COT indicates it is an absolute buy whilst the market continues to pile in on the short side. The swing when it happens will be ferocious and many will suffer deeply.
Precious metals have fallen considerably of their highs and are now beginning to show signs of value.
Risk is beginning to show signs of problems.
 
Therefore our recommendations for next week are:
Stay wary of the USD
Begin accumulating precious metals
Buy the EURO
Begin selling risk.
 
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