Weekly Fundamentals - 23 April 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report three weeks ago we wrote:
"The USD continues to fail to make new highs
This continues to bode well for precious metals in the medium to long term
However in the short term it would appear that risk is oversold and due for a corrective move higher
Precious metals are over extended on the upside in the short term.
 
Therefore our recommendations for next week are:
Take short term profits on precious metals
Sell risk on any further strength
Buy the 30 YEAR BOND on any weakness
We continue to predict a 20% in risk over the following summer months.
 
Now let's see how we fared on our recommendations:
Taking profits on the precious metals was the correct move as gold did nothing and silver fell strongly
We were given more opportunities to sell risk
The 30 YEAR BOND rose slightly
 
A good week.
 
A busy week in terms of data.
 
USD:The US$ Index closed lower but well off its lows last week.
On Tuesday we have Consumer Confidence which is expected to decline from 125.6 to 123.7
On Wednesday we have Crude Oil Inventories
Thursday sees the release of Core Durable Goods Orders anticipated to fall from 0.5% to 0.4%. This is followed by the usual Unemployment Claims figure thought to be 241,000 from the previous 244,000.
Finally on Friday we have the GDP number expected to decline markedly from 2.1% to 1.3%.
COT data shows that large commercials decreased their net short position in the US$ Index from -50,086 to -48,805 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO:The EURO rose reasonably against the USD last week.
A busy week for the EURO.
On Sunday we have the important French Presidential Election
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. This is followed by the ECB Press Conference.
COT data for the Euro shows that large commercials increased their net long position from +16,076 to +20,348 last week. We therefore remain SLIGHTLY BEARISH.
 
GBP:The GBP closed up strongly against the USD last week.
Only one item for the GBP this week which is the GDP number on Friday which is anticipated to decline from 0.6% to 0.4%.
COT data shows that large commercials slightly decreased their net long position from +112,430 to +105,212 last week. This remains close to a 52 week high and we therefore remain BULLISH.
 
YEN:The YEN fell slightly against the USD last week.
A busy week for the YEN.
On Wednesday we have the Monetary Policy Statement.
On Thursday we have the BOJ Outlook Report, the Policy rate and the Press Conference.
Finally we have the Household Spending figure which is thought to decline to -0.6% from the previous -3.8%.
COT data shows that large commercials significantly decreased their net long position from +60,206 to +38,128 last week. We therefore remain SLIGHTLY BULLISH.
 
AUD:The AUD fell slightly against the USD last week.
On Tuesday we have CPI expected to rise from 0.5% to 0.6%.
On Wednesday the RBA Governor speaks.
COT data shows that large commercials slightly decreased their net short position from -48,446 to -46,433. This continues to be close to a 52 week extreme. We therefore remain BEARISH.
 
 CNY:Two items for the CNY this week.
On Saturday we have both Manufacturing and Non-Manufacturing PMI.
There is no COT data for the CNY.
 
COT data of note on products we regularly comment on in our DAILY REPORTSand WEEKLY BONUS VIDEOSand for those products which show large commercials with extreme net positions.
 
RISK:
S&P500: The S&P500 rose slightly last week. Large commercials increased their net short position from -97,335 to -132,765 last week. We therefore remain BEARISH.
RUSSELL2000: The RUSSELL2000 rose reasonably last week. Large commercials increased their net long position from +56,108 to +66,114 last week. We thereforeremain SLIGHTLY BULLISH.
NASDAQ100:The NASDAQ100 rose reasonably last week. Large commercials increased their net short position from -97,206 to -105,619 last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD was virtually unchanged last week. Large commercials increased their net short position from -187,364 to -211,064 last week. Now that large commercials hold a net short position which is greater than 200,000 we are slightly bearish. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH.
SILVER: SILVER fell strongly last week. Large commercials increased their net short position from -114,414 to -116,832 last week. This is now a 52 week extreme so remain VERY BEARISH.
COPPER: COPPER fell reasonably last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net short position from -30,265 to -18,392 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 strongly last week. Large commercials increased their net short position from -429,398 to -445,250 last week. We therefore remain VERY BEARISH.
 
The gold:silver ratio increased from 69.54 to 71.73 indicating meaningful silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose very slightly last week. Large commercials significantly decreased their net long position from +47,178 to +18,294 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: The CAN$ fell strongly last week. Large commercials increased their net long position from +38,595 to +42,167 last week. We thereforeremain SLIGHTLY BULLISH.
NZD:The NZD rose very slightly last week. Large commercials very marginally decreased their net long position from +15,970 to +15,757 last week. We therefore remain SLIGHTLY BULLISH.
AUD/YEN:The AUD fell slightly in this pair. COT for the AUD slightly improved and  significantly worsened for the YEN indicating that the short term bias continues to be in favour of risk at this time.
 
THOUGHTS FOR NEXT WEEK
The USD continues to fail to make new highs
This continues to bode well for precious metals in the medium to long term
However in the short term it would appear that risk is oversold and due for a corrective move higher
This is borne out by the worsening COT readings for the YEN, BOND, GOLD and SILVER
Precious metals should be the worst performing asset class in the near term.
 
Therefore our recommendations for next week are:
Go short the precious metals
Sell risk on any further strength
Buy the 30 YEAR BOND on any weakness
We continue to predict a 20% in risk over the following summer months.
 
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