Weekly Fundamentals - 28 November 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
DUE TO THE THANKSGIVING HOLIDAY COT DATA WAS DELAYED UNTIL TODAY.
 
In conclusion to our report two weeks ago we wrote:
"We are fast approaching the end of the calendar year.
What this means is dwindling volumes and heightened volatility as funds and traders tey to eke out quick returns to safeguard their bonus'.
We remain of the view that risk is in a precarious position and precious metals a small buy on every dip. However this is our long term view. Our short one will always be dictated and determined by COT findings.
This week there is little in the way of any changes with the exception of Copper and the Bond.
 
Therefore our recommendations for next week are:
Sell Copper
Buy the Long Bond.

Now let's see how we fared on our recommendations:
Selling copper proved premature as it rallied
Buying the Long Bond was a marginally good move
 
A mixed week.
 
A busy week in terms of data culminating in the NonFarm Payroll data in The US on Friday.
 
USD: The US$ Index closed virtually unchanged on the week.
We start on Tuesday with GDP which is expected to improve from 2.9% to 3.0%. This is followed by Consumer Confidence which is thought to make a strong upward spike higher from 98.6 to 101.3.
On Wednesday we have Crude Oil Inventories which this week will be even more important as we also have a full day of OPEC Meetings.
On Thursday we have the usual Unemployment Claims figure which is estimated to remain virtually unchanged at 252,000 and Manufacturing PMI also virtually unchanged at 54.4.
Friday is the big day when we start with Average Hourly Earnings anticipated to fall from 0.4% to 0.2%, the NonFarm Payroll number expected to rise slightly from 161,000 to 165,000 and finally the Unemployment Rate expected to be unchanged at 4.9%.
COT data shows that large commercials marginally increased their net short position in the US$ Index from -53,240 to -59,139 last week. We therefore alter our view from SLIGHTLY BULLISH to NEUTRAL.
 
EURO: The EURO was virtually unchanged against the USD last week.
Two items for the EURO this week, both Central Bank related.
On both Monday and Wednesday the ECB President speaks.
COT data for the Euro shows that large commercials slightly increased their net long position from +130,972 to +132,070 last week. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP rose slightly against the USD last week. The GBP continues to trade near a 31 year low against the USD.
On Wednesday we have the Bank Stress Test Results.
Thursday sees the release of Manufacturing PMI thought to be 54.4 similar to last month's 54.3.
On Friday we have Construction PMI expected to decline from 52.6 to 52.3.
COT data shows that large commercials decreased their net long position from +94,327 to +88,843 last week. We therefore remain BULLISH.
 
YEN: The YEN fell against the USD last week, closing close to its lows.
Only one item for the YEN this week which is on Monday when we have Household Spending thought to make a big improvement from -2.1% to -1.0%.
COT data shows that large commercials massively decreased their net short position from -6,905 and are now net long +8,964 last week. We therefore remain BULLISH.
 
AUD: The AUD rose against the USD last week.
On Wednesday we have Private Capital Expenditure which is anticipated to make a big improvement from last month's -5.4% to -2.8%.
Thursday sees Retail sales expected to fall from 0.6% to 0.3%.
COT data shows that large commercials significantly decreased their net short position from -45,563 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
CNY: We have both Manufacturing and Non-Manufacturing PMI both on Wednesday.
The former is expected to decrease slightly from 51.2 to 51.0 whilst the latter is anticipated to remain static at 54.0.
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: The S&P500 rose strongly last week. Large commercials decreased their net short position from -26,282 and are now net long +20,215 last week. We therefore alter our view from SLIGHTLY BEARISH to NEUTRAL.
RUSSELL2000: The RUSSELL2000 rose substantially last week closing on its highs. Large commercials increased their net short from -25,268 to -39,760 last week. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 rose last week. Large commercials increased their net short position from -74,939 to -87,615 last week. We therefore remain NEUTRAL.
 
COMMODITIES:
GOLD: GOLD fell last week. Large commercials slightly decreased their net short position from -199,966 to -192,172 last week. Now that large commercials hold a net short position which is smaller than 200,000 we turn slightly bullish. We therefore remain SLIGHTLY BULLISH.
SILVER: SILVER fell slightly last week. Large commercials very slightly decreased their net short position from -78,521 to -78,232 last week. We therefore remain BEARISH.
COPPER: COPPER rose strongly last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net short position from -43,264 to -48,048 last week. Large commercials generally carry a net neutral position. This is now a substantial short position and is a 52 week extreme. We therefore remain BEARISH.
CRUDE OIL: CRUDE fell slightly last week. Large commercials slightly increased their net short position from -277,574 to -281,929 last week. We therefore remain BEARISH.
 
The gold:silver ratio decreased from 72.95 to 71.73 indicating silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose very marginally last week. Large commercials increased their net long +27,236 to +35,476 last week. We therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ fell marginally last week. Large commercials decreased their net long position +32,534 to +29,571 last week. We therefore remain BULLISH.
NZD: The NZD rose last week. Large commercials significantly decreased their net short position from -3,737 to -523 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.

THOUGHTS FOR NEXT WEEK
An important week as we have the US employment figures.
In Europe we have the Italian Referendum on Sunday the 4/12. Why is this important?
Investors are concerned that a defeat for Prime Minister Matteo Renzi constitutional reform referendum would undermine the nation’s fragile political stability and could lead to early elections and a rise in support for the populist Five Star Movement. This party has pledged to carry out a referendum on whether Italy should stay in the euro area.
This coupled with the fact that we are fast approaching year end will ensure heightened volatility.
There are a number of changes to COT data this week.
 
Therefore our recommendations for next week are:
Go flat on the USD
Go slightly long on AUD
Stay wary of risk
Buy gold on any dip.
 
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