Weekly Fundamentals - 05 May 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
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.”
 
Now let's see how we fared on our recommendations:
Remaining short the precious metals was brilliant
Selling risk on further strength was provided with another opportunity
Buying the 30 YEAR BOND was also provided with opportunity
 
A very good week.
 
Another very busy week in terms of data with some central bank activity and the start of the two day G7 meetings at the end of the week which affects all the products we follow.
 
USD:The US$ Index closed strongly lower last week ending on its lows
We start on Wednesday with Crude Oil Inventories
On Thursday we have the usual Unemployment Claims figure estimated to be 245,000 from the previous 238,000. This is followed by PPI expected to rise from -0.1% to 0.2%.
On Friday we have both Core CPI and CPI. The former excludes food and energy and is thought to rise from -0.1% to 0.2%. CPI is also expected to rise from -0.3% to 0.2%.
Core Retail Sales and Retail Sales follow. The former excludes car sales and is anticipated to move from 0.0% to 0.5% whilst the latter is expected to rebound strongly from -0.2% to 0.6%.
We finally end with Consumer Sentiment thought to remain unchanged at 97.0.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -49,021 to -45,492 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO:The EURO rose strongly closing on its highs against the USD last week.
Only one item for the EURO this week.
On Sunday we have the French Presidential election.
COT data for the Euro shows that large commercials significantly decreased their net long position from +13,789 to +828 last week. We therefore alter our view from SLIGHTLY BEARISH to BEARISH.
 
GBP:The GBP closed slightly lower against the USD last week.
A busy week for the GBP, all on Thursday.
Manufacturing Production is thought to have declined further from the previous -0.1% to -0.2%.
This is followed by the BOE Inflation Report, the MPC Official bank Rate votes expected to remain at 1-0-8, the Official Bank Rate also expected to remain unchanged at 0.25% and finally the Monetary Policy Summary.
COT data shows that large commercials decreased their net long position from +92,281 to +78,532 last week. We therefore remain BULLISH.
 
YEN:The YEN closed sharply lower against the USD last week.
There is no data for the YEN this week.
COT data shows that large commercials increased their net long position from +33,802 to +42,119 last week. We therefore remain SLIGHTLY BULLISH.
 
AUD:The AUD fell sharply against the USD last week.
On Monday we have Retail Sales expected at 0.3% from the previous -0.1%.
On Tuesday we have the Annual Budget Release.
COT data shows that large commercials slightly decreased their net short position from -41,896 to -40,638.We therefore remain BEARISH.
 
 CNY:Three items for the CNY this week.
On Sunday we have the Trade balance number thought to be 197B from the previous 164B.
Tuesday sees both CPI and PPI. The former is expected to rise from 0.9% to 1.1% whilst the latter is thought to decline from 7.6% to 6.8%.
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 highs. Large commercials decreased their net short position from -87,466 to -24,540 last week. We therefore remainBEARISH.
RUSSELL2000: The RUSSELL2000 fell very slightly last week. Large commercials massively decreased their net long position from +24,709 to +427 last week. We thereforealter our view from SLIGHTLY BULLISH to NEUTRAL.
NASDAQ100:The NASDAQ100 rose strongly last week. Large commercials slightly decreased their net short position from -113,568 to -104,201 last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD fell strongly last week closing on its lows. Large commercials slightly decreased their net short position from -214,580 to -203,986 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 closing on its lows. Large commercials decreased their net short position from -108,089 to -86,574 last week. This is no longer close to a 52 week extreme so we alter our view from VERY BEARISH to BEARISH.
COPPER: COPPER closed lower last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net short position from -11,990 to -19,482 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 sharply last week. Large commercials decreased their net short position from -433,625 to -409,860 last week. We therefore remain VERY BEARISH.
 
The gold:silver ratio increased from 73.88 to 75.29 indicating meaningful silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND fell and closed on its lows last week. Large commercials significantly decreased their net short of -7,773 and are now net long +10,378 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: The CAN$ closed virtually unchanged last week. Large commercials increased their net long position from +52,745 to +61,470 last week. We thereforeremain SLIGHTLY BULLISH.
NZD:The NZD closed slightly higher last week. Large commercials slightly decreased their net long position from +16,555 to +14,227 last week. We therefore remain SLIGHTLY BULLISH.
AUD/YEN:This pair closed virtually unchanged last week. COT for the AUD was virtually unchanged and improved for the YEN indicating that the short term bias is slowly beginning to alter from ‘risk on’ to ‘risk off’.
 
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 both short and medium term bias is now beginning to turn towards caution
The COT for the EURO is indicating that a positive French election outcome is already priced into the market and therefore any reduction in the lead of Macron over Le Pen will be dealt with harshly for EURO bulls irrespective of the fact that Macron wins
Whilst this may be viewed as USD bullish it would be far better to book profits on short precious metal positions with a view to going long very slowly
 
Therefore our recommendations for next week are:
Take profits on short precious metal positions and begin slowly accumulating
Sell risk on any further strength
Buy the 30 YEAR BOND on any weakness
Buy the CAN$
We continue to predict a 20% in risk over the following summer months.
 
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