Weekly Fundamentals - 29 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
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.”
 
Now let's see how we fared on our recommendations:
Going short the precious metals was a brilliant trade
Selling risk into further strength was given ample opportunity
Buying the 30 YEAR BOND on weakness was possible as it fell slightly
We continue to predict a 20% risk correction this summer which will bode well for our longer term views on precious metals, risk and the 30 YEAR BOND.
 
A very good week.
 
A very busy week in terms of data with central bank activity and culminating in the NonFarm Payroll data at the end of the week.
 
USD:The US$ Index closed strongly lower last week
A very busy week.
On Monday the Treasury Secretary speaks. This is followed by the Manufacturing PMI anticipated to decline from 57.2 to 56.6.
On Wednesday we start with Non-Manufacturing PMI thought to rise from 55.2 to 56.1. Crude Oil Inventories is followed by the all important FOMC Statement and the Fed Funds rate which is expected to remain unchanged at 1.00%.
Thursday we have the usual Unemployment Claims figure estimated to fall from 257,000 to 246,000.
Finally on Friday we have Average Hourly Earnings anticipated to rise from 0.2% to 0.3%, NonFarm number expected to rise strongly from 98,000 to 194,000, the Unemployment rate which is estimated to rise from 4.5% to 4.7% and finally the FED Chairperson speaks.
COT data shows that large commercials slightly increased their net short position in the US$ Index from -48,805 to -49,021 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.
On Thursday the ECB President speaks.
COT data for the Euro shows that large commercials decreased their net long position from +20,348 to +13,789 last week. We therefore remainSLIGHTLY BEARISH.
 
GBP:The GBP closed up slightly against the USD last week.
Three items for the GBP this week.
On Tuesday we have Manufacturing PMI thought to decrease from 54.2 to 54.0.
On Wednesday we have Construction PMI expected to make a small decline from 52.2 to 52.1.
On Thursday we have Services PMI also thought to fall from 55.0 to 54.6.
COT data shows that large commercials decreased their net long position from +105,212 to +92,281 last week. This remains close to a 52 week high and we therefore remainBULLISH.
 
YEN:The YEN rose strongly against the USD last week.
There is no data for the YEN this week.
COT data shows that large commercials decreased their net long position from +38,128 to 33,802 last week. We therefore remain SLIGHTLY BULLISH.
 
AUD:The AUD fell reasonably against the USD last week.
We start on Tuesday with the Cash Rate expected to remain unchanged at 1.50%. This is followed by the RBA Rate Statement.
On Wednesday we have the Trade balance number estimated to fall slightly from 3.57B to 3.33B. This is followed by the RBA Governor speaking.
On Thursday we have the RBA Monetary Policy Statement.
COT data shows that large commercials slightly decreased their net short position from -46,433 to -41,896.We therefore remain BEARISH.
 
 CNY:One item for the CNY this week.
On Monday we have manufacturing PMI expected to make a small gain from 51.2 to 51.4.
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 strongly last week. Large commercials decreased their net short position from -132,765 to -87,466 last week. We therefore remainBEARISH.
RUSSELL2000: The RUSSELL2000 rose strongly last week. Large commercials decreased their net long position from +66,114 to +24,709 last week. We thereforeremainSLIGHTLY BULLISH.
NASDAQ100:The NASDAQ100 rose strongly last week. Large commercials increased their net short position from -105,619 to -113,568 last week. We therefore remainSLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD fell strongly last week. Large commercials slightly increased their net short position from -211,064 to -214,580 last week. Now that large commercials hold a net short position which is greater than 200,000 we are bearish. We therefore remain BEARISH.
SILVER: SILVER fell very strongly last week. Large commercials decreased their net short position from -116,832 to -108,089 last week. This is close to a 52 week extreme so we remainVERY BEARISH.
COPPER: COPPER rose well last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net short position from -18,392 to -11,990 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 remainBEARISH.
CRUDE OIL: CRUDE fell slightly last week. Large commercials decreased their net short position from -445,250 to -433,625 last week. We therefore remain VERY BEARISH.
 
The gold:silver ratio increased from 71.73 to 73.88 indicating meaningful silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND fell slightly last week. Large commercials significantly decreased their net long position from +18,294 and are now net short -7,773 last week. We therefore alter our view from SLIGHTLY BULLISH toNEUTRAL.
 
OTHER FX:
CAN$: The CAN$ fell strongly last week. Large commercials increased their net long position from +42,167 TO +52,745 last week. We thereforeremainSLIGHTLY BULLISH.
NZD:The NZD fell strongly last week. Large commercials increased their net long position from +15,757 to +16,555 last week. We therefore remainSLIGHTLY BULLISH.
AUD/YEN:The AUD rose slightly in this pair. COT for the AUD slightly improved and  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
Risk would now appear to be over extended and whilst short term upside remains a strong potentiality both FED activity and the Employment data might herald the beginning of the impending correction we have been warning about over the last few weeks.
 
Therefore our recommendations for next week are:
Remain short the precious metals until the Friday data
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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