Weekly Fundamentals - 03 December 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report two weeks ago we wrote:
"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."

Now let's see how we fared on our recommendations:
Going flat on the USD was a good call as it fell marginally.
Going slightly long on the AUD was good as it closed marginally higher on the week.
Staying wary of risk was correct as all risk fell.
Buying gold on a dip was good as it fell marginally.
 
A good week.
 
A relatively quiet week in terms of data.
 
USD: The US$ Index fell slightly on the week.
On Monday we have Non Manufacturing PMI expected to rise slightly from 54.8 to 55.3.
On Wednesday we have Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims figure estimated to rise to 272,000 from 268,000.
Finally on Friday we have Consumer Sentiment anticipated to increase from 93.8 to 94.3.
COT data shows that large commercials marginally increased their net short position in the US$ Index from -59,139 to -59,810 last week. We therefore remain NEUTRAL.
 
EURO: The EURO rose against the USD last week.
Today is the big day for the EURO as we have the Italian Constitution Amendment Vote.
On Thursday we have the Minimum Bid Rate which is the Interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system in the Euro zone.
This is followed by the ECB Press Conference.
COT data for the Euro shows that large commercials slightly decreased their net long position from +132,070 to +128,794 last week. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP rose convincingly against the USD last week. The GBP continues to trade near a 31 year low against the USD.
We start on Monday with Services PMI thought to decline marginally from 54.5 to 54.2.
On Wednesday we have Manufacturing Production expected to fall from 0.6% to 0.2%.
COT data shows that large commercials increased their net long position from +88,843 to +91,383 last week. We therefore remain BULLISH.
 
YEN: The YEN fell very slightly against the USD last week.
On Wednesday we have the Current Account number expected to rise from 1.48T to 1.57T. This is followed by GDP thought to rise from 0.5% to 0.6%.
Thursday sees the release of the Manufacturing Index expected to rise from 2.9% to 3.4%.
COT data shows that large commercials increased their net long position from +8,964 to +24,168 last week. We therefore remain BULLISH.
 
AUD: The AUD rose very slightly against the USD last week.
On Monday we have the Cash rate which is the interest rate charged on overnight loans between financial intermediaries. This is followed by the RBA Rate Statement.
Tuesday sees the release of GDP expected to decline from 0.5% to 0.2%.
COT data shows that large commercials significantly decreased their net short position from -27,269 to -17,297 last week. We therefore remain SLIGHTLY BULLISH.
 
CNY: On Sunday we have Services PMI anticipated to be 52.7 from 52.4.
On Thursday we have both CPI and PPI. The former is thought to be 2.2% from the previous 2.1% and the latter 2.2% from the previous 1.2%.
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 fell strongly last week. Large commercials substantially increased their net long position from +20,215 to +81,918 last week. We therefore remain NEUTRAL.
RUSSELL2000: The RUSSELL2000 fell substantially last week closing on its highs. Large commercials increased their net short from -39,760 to -44,348 last week. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 fell substantially last week. Large commercials substantially decreased their net short position -87,615 to -44,348 last week. We therefore remain NEUTRAL.
 
COMMODITIES:
GOLD: GOLD fell slightly last week. Large commercials decreased their net short position from -192,172 to -167,823 last week. Now that large commercials hold a net short position which is smaller than 200,000 we are slightly bullish. We therefore remain SLIGHTLY BULLISH.
SILVER: SILVER rose last week. Large commercials slightly decreased their net short position from -78,232 to -75,445 last week. We therefore remain BEARISH.
COPPER: COPPER fell last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net short position from -48,048 to -52,600 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 rose substantially last week closing on its highs. Large commercials increased their net short position from -281,929 to -304,685 last week. We therefore remain BEARISH.
 
The gold:silver ratio decreased from 71.73 to 70.40 indicating silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND fell very marginally last week. Large commercials increased their net long +35,476 to +55,133 last week. We therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ rose last week. Large commercials decreased their net long position +29,571 to +27,182 last week. We therefore remain BULLISH.
NZD: The NZD rose last week. Large commercials significantly decreased their net short position from -523 and are now net long +1,575 last week. We therefore remain SLIGHTLY BULLISH.

THOUGHTS FOR NEXT WEEK
Not a great many changes in COT readings this week so therefore our thoughts and recommendations remain intact.
Of most interest is how the Italian Constitutional referendum plays out and what affect it will have on the EURO.
Whilst we are slightly bearish on the EURO the result may provide us the opportunity to change our stance.
Of most interest would be the not unreasonable change in COT for gold which for many months has been at or near a bearish extreme. That seems to be coming to an end.
Volatility will remain high as we fast approach the end of the year and the upcoming holiday season.
 
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.
Prepare to buy EURO on a fall.
 
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