Weekly Fundamentals - 14 January 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report three weeks ago we wrote:
"Two changes in COT thoughts.
We turn bearish on the S&P500 from neutral which means that all our risk indicators are now bearish and we turn bullish on the NZD from Bearish.
If we could we would also trade the CNY with a positive bias.
The inauguration of Trump as president on the 20/1 will herald the top in risk.
 
Therefore our recommendations are:
Unchanged as from our last report
Use rallies in risk to sell into
Buy precious metals especially gold on dips
Buy bonds on dips
Sell the USD on any rallies especially against the AUD, YEN and NZD."
 
Now let's see how we fared on our recommendations:
Selling rallies in risk continues to be a good idea
Buying the precious metals was a good move
Buying bonds on dips was also good
Selling the USD against the YEN, AUD and NZD was brilliant.
 
A very good week.
 
A busy week in terms of data for everything we follow.
 
USD: The US$ Index closed meaningfully lower last week.
We start on Wednesday with both Core CPI and CPI. The former is thought to remain unchanged at 0.2% whilst the latter is expected to rise from 0.2% to 0.3%.
Also on Wednesday the FED Chairperson speaks.
Thursday is a busy day. We start with Building Permits thought to rise from 1.20m to 1.22m. This is followed by the FED Manufacturing Index expected to fall from 21.5 to 16.3. We then have Crude Oil Inventories and finally the usual Unemployment Claims number thought to rise from 247,000 to 252,000.
COT data shows that large commercials marginally decreased their net short position in the US$ Index from -60,352 to -59,883 last week. This is close to a 52 week extreme so we therefore remain SLIGHTLY BEARISH.
 
EURO: The EURO rose against the USD last week.
Two items for the EURO this week, both of which are 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 followed by the important ECB Press Conference.
COT data for the Euro shows that large commercials slightly decreased their net long position from +73,705 to +72,830 last week. We therefore remain SLIGHTLY BEARISH.
 
GBP: The GBP fell against the USD last week.
A busy week for the GBP.
On Monday the BOE governor speaks.
On Tuesday we have CPI anticipated to rise from 1.2% to 1.4% and the Prime Minister speaks.
On Wednesday we have the Average Hourly Earnings Index expected to rise from 2.5% to 2.6%. This is followed by the Claimant Count Change anticipated to rise steeply from 24,000 to 46,000.
Finally on Friday we have Retail Sales estimated to fall from 0.2% to -0.1%.
COT data shows that large commercials slightly increased their net long position from +77,912 to +78,059 last week. We therefore remain BULLISH.
 
YEN: The YEN rose strongly against the USD last week.
The only major bit of news for the YEN this week is participation at the World Economic Forum. This is an annual meeting held in Davos, Switzerland and attended by central bankers, prime ministers, finance ministers, trade ministers, and business leaders from over 90 countries. Most meetings are open to the press and officials usually talk with reporters throughout the day. Comments from central bankers and other influential officials can create significant market volatility.
COT data shows that large commercials marginally decreased their net long position from +113,963 to +107,588 last week. We therefore remain BULLISH.
 
AUD: The AUD rose strongly against the USD last week.
Two items for the AUD both on Wednesday.
We start with the Employment Change number thought to fall from 39,100 to 10,200. This is followed by the Unemployment rate figure expected to remain at 5.7%.
COT data shows that large commercials increased their net long position from +14,192 to +16,043 last week. We therefore remain SLIGHTLY BULLISH.
 
CNY: Three items for the CNY this week.
A busy week for the CNY this week all data takes place on Thursday.
We start with GDP expected to remain static at 6.7%.
We then have Industrial Production expected to decrease slightly from 6.2% to 6.1%.
This is followed by Fixed Asset Investment anticipated to remain at 8.3%.
Finally the National Bureau of Statistics Press Conference. The press conference has 2 parts - first a prepared statement is read which announces the key economic numbers, then the conference is briefly open to press questions. The questions sometimes lead to unscripted answers that can have a significant market impact.
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 very slightly last week. Large commercials substantially decreased their net short position of -22,856 and are now marginally net long +9,365 last week. We therefore remain BEARISH.
RUSSELL2000: The RUSSELL2000 rose slightly last week. Large commercials slightly decreased their net short from -100,727 to -90,546 last week. This continues to be close to a 52 week extreme. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 rose last week closing on its high. Large commercials slightly increased their net short position from -81,863 to -83,809 last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD rose last week. Large commercials increased their net short position from -117,612 to -125,816 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 increased their net short position from -75,814 to -78,937 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 -46,943 to -50,099 last week. Large commercials generally carry a net neutral position. This is now a substantial short position and remains close to a 52 week extreme. We therefore remain BEARISH.
CRUDE OIL: CRUDE fell slightly over the period. Large commercials very slightly decreased their net short position from -466,764 to -465,400 last week. This continues to be a 52 week extreme. We therefore remain BEARISH.
 
The gold:silver ratio decreased from 71.30 to 71.20 indicating slight silver outperformance over the period.

DEBT:
US 30 YEAR BOND: The BOND rose last week. Large commercials substantially increased their net long position from +69,794 to +89,656 last week, This is now a 52 week extreme. We therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ rose last week. Large commercials decreased their net long position +14,171 to +11,325 last week. We therefore remain SLIGHTLY BULLISH.
NZD: The NZD rose strongly last week. Large commercials increased their net long position from +12,140 to 13,751 last week. We therefore remain BULLISH.

THOUGHTS FOR NEXT WEEK
No changes to our thoughts of last week with the exception that the US 30 Year Bond is beginning to look like good value and as we believe that the inauguration of Trump as president on the 20/1 will herald the top in risk, the bond may witness a flight to safety.
 
Therefore our recommendations are:
Unchanged as from our last report
Use rallies in risk to sell into
Buy precious metals especially gold on dips
Buy bonds on dips
Sell the USD on any rallies especially against the AUD, YEN and NZD.
 
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