Weekly Fundamentals - 11 December 2016

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

Now let's see how we fared on our recommendations:
Going flat on the USD was a good call as it closed unchanged on the week.
Going slightly long on the AUD was neither here nor there as it too closed unchanged on the week.
Staying wary of risk was not good as risk rallied strongly as measured by the SP500.
The week was a good one for buying gold on a dip as it fell.
The week should have been used to start buying the EURO as it fell marginally.
 
An average week.
 
A busy week in terms of data especially for the USD and GBP.
 
USD: The US$ Index closed unchanged on the week.
Wednesday is a busy day.
We start with Core Retail Sales which excludes automobiles. It is expected to fall to 0.4% from 0.8%.
PPI follows and is thought to rise slightly from 0.0% to 0.1%.
Retail Sales is expected to fall from 0.8% to 0.3%.
We then have FOMC Economic Projections, the FOMC Statement and the FED Funds Rate which is anticipated to rise from 0.50% to 0.75%.
This is followed by the FOMC Press conference.
Finally we also have Crude Oil Inventories.
On Thursday we have both CPI and Core CPI which excludes food and energy. The former ia thought to fall from 0.4% to 0.2% whilst the latter is thought to rise from 0.1% to 0.2%.
This is followed by the FED Manufacturing Index estimated to rise from 7.6 to 9.1 and finally the usual Unemployment Claims number.
Finally on Friday we have Building Permits anticipated to be 1.24M from the previous 1.26M.
COT data shows that large commercials marginally increased their net short position in the US$ Index from -59,810 to -61,536 last week. We therefore remain NEUTRAL.
 
EURO: The EURO fell against the USD last week.
There is no data for the EURO this week.

COT data for the Euro shows that large commercials slightly decreased their net long position from +128,794 to +126,616 last week. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP fell against the USD last week.
We start on Tuesday with CPI anticipated to rise from 0.9% to 1.1%.
On Wednesday we have Average Earnings Index thought to remain unchanged at 2.3%. This is followed by the Claimant Count Change which is thought to fall from 9,800 to 6,200.
Thursday sees the release of Retail Sales estimated to make a big fall from 1.9% to 0.2%.
We then have the MPC Official Bank Rate Votes thought to remain at 0-0-9. This is followed by the Monetary Policy Summary and the Official Bank Rate also thought to remain unchanged at 0.25%.
COT data shows that large commercials slightly decreased their net long position from +91,383 to +89,639 last week. We therefore remain BULLISH.
 
YEN: The YEN fell against the USD last week.
Two items both on Tuesday when we have Manufacturing and Non-Manufacturing Indices. The former is estimated to rise from 6 to 10 whilst the latter from 18 to 19.

COT data shows that large commercials significantly increased their net long position from +24,168 to +57,093 last week. We therefore remain BULLISH.
 
AUD: The AUD closed unchanged against the USD last week.
Two items for the AUD this week both on Wednesday.
The Employment Change number is expected to rise from 9,800 to 17,600 whilst the Unemployment Rate is anticipated to remain unchanged at 5.6%.
COT data shows that large commercials increased their net short position from -17,297 to -19,803 last week. We therefore remain SLIGHTLY BULLISH.
 
CNY: On Monday we have Industrial Production and Fixed Asset Investment. Both are expected to remain unchanged at 6.1% and 8.3% respectively.
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 closing on its high. Large commercials decreased their net long position from +81,918 to +73,358 last week. We therefore remain NEUTRAL.
RUSSELL2000: The RUSSELL2000 rose strongly last week. Large commercials increased their net short from -44,348 to -57,477 last week. This is a 52 week extreme. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 rose substantially last week closing on its high. Large commercials slightly increased their net short position -44,348 to -51,400 last week. We therefore remain NEUTRAL.
 
COMMODITIES:
GOLD: GOLD fell last week closing on its low. Large commercials decreased their net short position from -167,823 to -154,944 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 was unchanged last week. Large commercials slightly increased their net short position from -75,445 to -75,740 last week. We therefore remain BEARISH.
COPPER: COPPER rose slightly last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net short position from -52,600 to -57,469 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 slightly last week closing on its highs. Large commercials substantially increased their net short position from -304,685 to -399,361 last week. This is now a 52 week extreme. We therefore remain BEARISH.
 
The gold:silver ratio decreased from 70.40 to 68.98 indicating strong silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND fell last week. Large commercials increased their net long +55,133 to +72,706 last week. We therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ rose last week. Large commercials decreased their net long position +27,182 to +22,893 last week. We therefore remain alter our view from BULLISH to SLIGHTLY BULLISH.
NZD: The NZD closed virtually unchanged last week. Large commercials increased their net short position from +1,575 to +2,318 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.

Therefore our recommendations for next week are:
Stay flat on the USD
Go long on AUD
Stay wary of risk
Continue buying gold on any dip.
Continue buying the EURO on any dip.
 
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