Weekly Fundamentals - 19 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 both short and medium term bias is now beginning to turn towards caution
COT for commodity backed currencies are improving especially for the CAN$ which is at a 52 week extreme.
Our commencement of COT analysis for VIX shows that large commercials are worried about risk
 
Therefore our recommendations for next week are:
Buy precious metals on any weakness
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 as determined by VIX.”
 
Now let's see how we fared on our recommendations:
Buying precious metals was a great call
Selling risk was also good
Buying the 30 YEAR BOND was magnificent
Buying the CAN$ was a brilliant trade
 
An exceptional week.
 
A relatively quiet week in terms of data. Thursday sees the OPEC meeting.
 
USD:The US$ Index closed strongly lower closing on its lows last week.
A relatively quiet week which I am sure Trump will make interesting.
On Wednesday we have both Crude Oil Inventories and the FOMC Meeting Minutes.
On Thursday we have the usual Unemployment Claims number.
 On Friday we have Core Durable Goods orders and the GDP number.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -41,969 to -40,400 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO:The EURO rose sharply against the USD last week closing on its highs.
On Monday we have Eurogroup Meetings. These are usually held in Brussels and attended by the Eurogroup President, Finance Ministers from euro area member states, the Commissioner for economic and monetary affairs, and the President of the European Central Bank. They discuss a range of financial issues, such as euro support mechanisms and government finances. The meetings are closed to the press but officials usually talk with reporters throughout the day, and a formal statement covering meeting objectives may be released after the meetings have concluded.
On Tuesday we have the German Business Climate figure.
Wednesday the ECB President speaks.
 
COT data for the Euro shows that large commercials increased their net short position last week from -33,199 to -48,951. This is a 52 week extreme and we therefore remain BEARISH.
 
GBP:The GBP closed sharply higher against the USD last week closing on its highs.
On Tuesday we have the Inflation Report hearings.
On Thursday we have the GDP number.
COT data shows that large commercials significantly decreased their net long position from +43,890 to +32,005 last week. This is a 52 week extreme so we remainSLIGHTLY BULLISH.
 
YEN:The YEN rose sharply against the USD last week.
There is no data for the YEN this week.
COT data shows that large commercials significantly increased their net long position from +57,893 to +82,358 last week. We therefore alter our view from SLIGHTLY BULLISH toBULLISH.
 
AUD:The AUD rose strongly against the closing near its highs last week.
There is no data for the AUD this week.
COT data shows that large commercials significantly decreased their net short position from -16,057 and are now net long +8,986.We therefore alter our view from SLIGHTLY BEARISH toSLIGHTLY BULLISH.
 
CNY:There is no data for the CNY this week.
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 fell last week but closed well off its lows. Large commercials substantially decreased their net short position from -87,994 to -29,977 last week. We therefore remainBEARISH.
RUSSELL2000: The RUSSELL2000 fell last week but closed off its lows. Large commercials increased their net long position from +29,787 to +35,799 last week. We thereforeremainSLIGHTLY BULLISH.
NASDAQ100:The NASDAQ100 fell last week but closed off its lows. Large commercials decreased their net short position from -91,864 to -75,189 last week. We therefore remainSLIGHTLY BEARISH.
VIX: Large commercials continued to buy protection last week increasing their net long position from +115,259 to 141,342. This is a 52 week extreme so we remain BULLISH on risk protection and NEGATIVE on risk.
 
COMMODITIES:
GOLD: GOLD rose sharply last week closing near its highs. Large commercials slightly decreased their net short position from -164,422 to -142,859 last week. This is a 52 week extreme. Now that large commercials hold a net short position which is lower than 200,000 we are bullish and as it is a 52 week extreme we alter our view from SLIGHTLY BULLISH toBULLISH.
SILVER: SILVER rose sharply higher last week closing near its highs. Large commercials decreased their net short position from -69,269 to -57,337 last week. This is a 52 week extreme. We therefore alter our view fromBEARISH toBULLISH.
COPPER: COPPER closed sharply higher last week ending on its highs. Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net short position from -8,300 to -7,288 last week. This is a 52 week extreme. Large commercials generally carry a net neutral position. This is very close to a neutral position and we therefore alter our view fromBEARISH to NEUTRAL.
CRUDE OIL: CRUDE rose sharply ending on its highs last week. Large commercials slightly decreased their net short position from -339,794 to -333,507 last week. We therefore remainSLIGHTLY BEARISH.
 
The gold:silver ratio increased from 74.21 to 74.60 indicating slight silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose sharply closing on its highs last week. Large commercials increased their net long position from +9,277 to +19,757 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: The CAN$ rose sharply closing on its highs last week. Large commercials very increased their net long position from +99,276 to +108,684 last week. This continues to be a 52 week extreme and we thereforeremainVERY BULLISH.
NZD:The NZD rose sharply closing on its highs last week. Large commercials slightly increased their net long position from +13,108 to +14,420 last week. We therefore remainSLIGHTLY BULLISH.
AUD/YEN:The AUD closed higher in this pair. COT for both the AUD and the YEN significantly improved last week. This should give impetus to commodity backed currencies as well as commodities.
 
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 is beginning to work through the forthcoming summer correction.
COT for commodity backed currencies are improving especially for the CAN$ which is at a 52 week extreme.
Our commencement of COT analysis for VIX shows that large commercials are worried about risk.
 
Therefore our recommendations for next week are:
Buy precious metals on any weakness
Sell risk on any further strength
Buy the 30 YEAR BOND on any weakness
Buy the CAN$ the YEN and the AUD
We continue to predict a 20% in risk over the following summer months as determined by VIX.
 
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