Weekly Fundamentals - 10 March 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report three weeks ago we wrote:
"Not much in the way of changes in our COT readings with the exception of the large increase in the net short for gold. However as long as large commercials remain below -200,000 net short we feel justified in remaining slightly bullish. However this reading does perhaps bode well for risk at least in the short term.
This week hinges on Friday's employment data and the usual Trump soundbites.
 
Therefore our recommendations for next week are:
Continue accumulating gold slowly on weakness
Continue selling risk especially if YEN shows accelerated signs of strength
Only continue buying the 30 year bond is risk falls
Sell crude."

Now let's see how we fared on our recommendations:
We were granted a great opportunity to buy gold on weakness
Selling risk as measured by the S&P500 was marginally correct as it fell very slightly even though the YEN also fell
As risk only fell very marginally we did not buy the 30 year bond as it fell strongly
Selling crude was a great trade.
 
A good week.
 
A busy week with central bank activity especially on Wednesday when the FED is expected to hike rates.
 
USD: The US$ Index closed slightly higher last week.
We start on Tuesday with PPI expected to fall markedly from 0.6% to 0.1%.
Wednesday is a busy day.
We have both CPI and Core CPI. The former is anticipated at 0.0% from the previous 0.6% whilst the latter is thought to be 0.2% from 0.3%.
This is followed by both Core Retail sales and Retail sales. The former is also expected to fall dramatically from 0.8% to 0.1% whilst the latter is expected to halve from 0.4% to 0.2%.
We then have a great deal of FED activity. We start with the FOMC Economic Projections. Then the FOMC Statement closely followed by the FED Funds rate expected to be increased from 0.75% to 1.00%. Finally we have the FOMC Press Conference.
Thursday starts with Building Permits thought to fall slightly from 1.29M to 1.26M. This is followed by the FED Manufacturing Index estimated to be 30.2 from 43.3 and finally the usual Unemployment Claims figure guesstimated to be 245,000 from the previous 243,000.
To end the week we have Consumer Sentiment thought to rise from 96.3 to 97.1
COT data shows that large commercials increased their net short position in the US$ Index from -51,199 to -58,486 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO: The EURO rose strongly against the USD last week.
Only one item for the EURO this week which takes place on Monday when the ECB President speaks.
COT data for the Euro shows that large commercials increased their net long position from +58,524 to +66,771 last week. We therefore remain NEUTRAL.
 
GBP: The GBP closed slightly lower against the USD last week.
A busy week for the GBP.
On Wednesday we have the Average Earnings Index expected to decline slightly from 2.6% to 2.4%.
This is followed by the Claimant Count Change which is estimated to rise from -42,400 to +3,200.
Thursday is the big day.
The MPC Official Bank rate Votes is anticipated to remain at 0-0-9 meaning all members vote for rates to remain the same.
next we have the Monetary Policy Summary and finally the Official bank Rate expected to remain at 0.25%.
COT data shows that large commercials substantially increased their net long position from +79,822 to +92,337 last week. This is once again approaching a 52 week high and we therefore alter our view from SLIGHTLY BULLISH to BULLISH.
 
YEN: The YEN fell slightly against the USD last week.
YEN will be driven by BOJ activity this week.
On Wednesday we have the BOJ Policy Rate which is the interest rate levied on excess current account balances held at the BOJ and is expected to remain at -0.10%.
This is followed by the Monetary Policy Statement.
On Thursday we have the BOJ Press Conference.
COT data shows that large commercials increased their net long position from +73,260 to +84,847 last week. We therefore remain BULLISH.
 
AUD: The AUD fell slightly against the USD last week.
Two items for the AUD this week.
On Wednesday we have the Employment Change figure thought to be 16,300 from 13,500.
This is followed by the Unemployment Rate thought to remain at 5.7%.
COT data shows that large commercials slightly decreased their net short position from -58,061 to -55,374. We therefore remain SLIGHTLY BEARISH.
 
CNY: Two items for the CNY this week.
On Monday we have Industrial production expected to rise from 6.0% to 6.2%.
This is followed by Fixed Asset Investment thought to rise from 8.1% to 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 fell slightly last week. Large commercials once again massively increased their net short position from -72,978 to -137,948 last week which is very close to a 52 week high. We therefore alter our view from BEARISH to VERY BEARISH.
RUSSELL2000: The RUSSELL2000 fell meaningfully last week. Large commercials decreased their net short from -26,298 and are now net long +2,118 last week. We therefore alter our view from BEARISH to NEUTRAL.
NASDAQ100: The NASDAQ100 rose slightly last week. Large commercials decreased their net short position from -83,638 to -74,902 last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD fell strongly last week. Large commercials decreased their net short position from -179,907 to -152,648 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 fell strongly last week. Large commercials slightly decreased their net short position from -108,010 to -105,862 last week. We therefore remain BEARISH.
COPPER: COPPER fell very strongly last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercial slightly decreased their net short position from -42,726 to -36,369 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 very strongly last week. Large commercials slightly decreased their net short position from -546,016 to -535,499 last week. This continues to be a 52 week extreme. We therefore remain VERY BEARISH.
 
The gold:silver ratio increased from 68.81 to 70.77 indicating significant silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND fell very strongly last week. Large commercials substantially increased their net long position from +48,904 to +72,235 last week. This is now approaching a 52 week extreme and therefore we alter our view from SLIGHTLY BULLISH to BULLISH.

OTHER FX:
CAN$: The CAN$ fell slightly last week. Large commercials meaningfully decreased their net short position from -37,625 to -28,459 last week. We therefore remain SLIGHTLY BEARISH.
NZD: The NZD fell strongly last week. Large commercials decreased their net short position from -5,341 and are now net long +2,252 last week. We therefore alter our view from BEARISH to NEUTRAL.

THOUGHTS FOR NEXT WEEK
What a difference a week makes.
Whilst the last few weeks have witnessed very few changes in our COT readings this week we have a number.
This week is also important as we have a number of Central banks making noise, the most important one being the FED on Wednesday.
A rate hike is widely expected and so therefore the wording is far more important. Are we potentially heading for another 3 hikes this year?
Risk at its all time high needs to beware.
 
Therefore our recommendations for next week are:
Continue accumulating gold slowly on weakness
Sell risk outright
Buy the GBP
Sell crude.
 
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