Weekly Fundamentals - 12 November 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report two weeks ago we wrote:
"There will only be one thing on traders minds next week which is the American election.
Whilst economic data is very light, volatility will not be.
The recent slump in risk has coincided with Trump's better fortunes in the opinion polls. If he does win risk may take a short term battering, if he does not they may spike higher.
However COT is beginning to tell us that they are oversold and due a bounce. Would it not be ironic if a Trump victory results in risk rallying and precious metals falling?
The USD remains under pressure irrespective of who wins.
 
Therefore our recommendations for next week are:
Stay wary of the USD
Continue accumulating precious metals but only on dips
Continue buying the EURO
Take profits on your risk short positions and begin accumulating very slowly."

Now let's see how we fared on our recommendations:
Staying wary of the USD could not have been more wrong as it rallied convincingly post the election closing the week on its highs.
Only time will tell whether buying the precious metals on dips will prove profitable. The end of the week was a good time to buy a small amount.
It was a bad week for the EURO as it closed on its lows.
Taking profits on risk short positions was a good one immediately post the election and slow accumulation was distinctly possible towards the latter part of the week.
 
A poor week.
 
A busy week in terms of data with some central bank activity as well.
 
USD: The US$ Index rose sharply closing on its highs for the week.
On Tuesday we have both Core Retail Sales and Retail Sales. The former which excludes cars is expected to remain static at 0.5% whilst the latter which includes cars is also expected to remain unchanged at 0.6%.
Wednesday sees the release of PPI again unchanged at 0.3% and Crude Oil Inventories.
On Thursday we start with Building Permits thought to decline from the previous 1.23m to 1.19M.
This is followed by both Core CPI which excludes food and energy and CPI. The former is expected to rise from 0.1% to 0.2% and the latter from 0.3% to 0.4%. We then have the Fed Manufacturing Index anticipated to decline from 9.7 to 8.1. Finally we have the usual Unemployment Claims number estimated to rise from 254,000 to 257,000.
On Friday the FED Chairperson testifies about economic outlook before the Joint Economic Committee.
COT data shows that large commercials marginally massively decreased their net short position in the US$ Index from -60,123 to -19,156 last week. We therefore alter our view from BEARISH to SLIGHTLY BULLISH.
 
EURO: The EURO fell against the USD and closed near its lows last week.
On Monday the ECB President speaks.
On Tuesday we have German GDP thought to decline from 0.4% to 0.3%.
Finally on Friday the ECB President speaks again.
COT data for the Euro shows that large commercials massively decreased their net long position from +156,389 to +4,005 last week which is now close to a 52 week rolling low. We therefore alter our view from BULLISH to BEARISH.
 
GBP: The GBP rose against the USD last week. The GBP continues to trade near a 31 year low against the USD.
Tuesday sees the release of CPI anticipated to rise slightly from 1.0% to 1.1%. This is followed by the BOE's Inflation Report.
On Wednesday we have the Average Earnings Index expected to remain unchanged at 2.3% and the Claimant Count Change which is thought to rise from 700 to 1,900.
Finally on Thursday we see Retail Sales which is thought to rise from 0.0% to 0.5%.
COT data shows that large commercials massively decreased their net long position from +96,565 to +1,432 last week. We therefore alter our view from VERY BULLISH to BEARISH.
YEN: The YEN fell against the USD last week, closing on its lows.
Only one item for the YEN this week which is on Sunday when we have the GDP n umber expected to remain unchanged at 0.2%.
COT data shows that large commercials massively decreased their net short position from -28,157 and are now net long +138,065 last week. We therefore alter our view from NEUTRAL to BULLISH.
 
AUD: The AUD fell against the USD last week.
On Monday we have the RBA Monetary Policy Meeting Minutes.
On Tuesday the RBA Governor speaks.
On Wednesday we have Unemployment Change which is estimated to rise massively from -9,800 to 20,300 and the Unemployment Rate which is thought to edge higher from 5.6% to 5.7%.
COT data shows that large commercials massively decreased their net short position from -46,709 and are now net long +43,277 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
CNY: Two items for the CNY this week both on Sunday.
We start with Industrial Production which is anticipated to rise from 6.1% to 6.2%.
This is followed by Fixed Asset Investment number expected to remain unchanged at 8.2%.
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 rose last week. Large commercials substantially increased their net short position from -56,964 to -131,948 last week. We therefore remain SLIGHTLY BEARISH.
RUSSELL2000: The RUSSELL2000 rose substantially last week. Large commercials decreased their net long position from +6,128 and are now net short -6,525 last week. We therefore alter our view from NEUTRAL back to BEARISH.
NASDAQ100:The NASDAQ100 rose slightly last week. Large commercials slightly decreased their net short position from -131,820 to -130,946 last week. We therefore remain NEUTRAL.
 
COMMODITIES:
GOLD:GOLD fell substantially last week. Large commercials massively decreased their net short position from -239,251 to -65,785 last week. Now that large commercials hold a net short position which is smaller than 100,000 we turn bullish. We therefore alter our view from NEUTRAL to BULLISH.
SILVER: SILVER fell substantially last week. Large commercials massively decreased their net short position from -76,917 to -22,629 last week. We therefore alter our view from BEARISH to BULLISH.
COPPER: COPPER rose last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net short position from -6,534 and are now net long 22,712 last week. Large commercials generally carry a net neutral position. This is now a reasonably substantial long position. We therefore alter our view from NEUTRAL back to BULLISH.
CRUDE OIL: CRUDE fell last week. Large commercials decreased their net short position from -375,009 to -309,918 last week. As this remains close to a 52 week extreme we remain BEARISH.
 
The gold:silver ratio decreased from 70.83 to 70.71 indicating marginal silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose last week. Large commercials increased their net long +22,024 to +38,708 last week. We therefore remain SLIGHTLY BULLISH.

OTHER FX:
CAN$: The CAN$ fell last week. Large commercials slightly decreased their net long position +24,770 to +23,532 last week. We therefore remain BULLISH.
NZD:The NZD fell last week. Large commercials increased their net short position from -433 to -11,624 last week. We therefore remain NEUTRAL.

THOUGHTS FOR NEXT WEEK
Wow what a difference a week makes!
A large number of changes in COT readings.
The Trump victory would seem to spell a return to a FED normalization of rates and so the USD soared.
Interestingly so have precious metals and the YEN.
Risk on the other hand has remained virtually unscathed.
Whilst this does mean that our recommendations below are markedly changed from the last few weeks the recommendations do come with a very strict warning, the uncertainty of what Trump has said and what he will do are very, very different things so the only thing we can say with any certainty is that volatility will remain heightened.
 
Therefore our recommendations for next week are:
Sell the EURO and GBP
Buy YEN
Sell risk in small amounts
Buy precious metals
Stay overly cautious!
 
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