Weekly Fundamentals - 26 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 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.”
 
Now let's see how we fared on our recommendations:
Buying precious metals was a great call
Selling risk was given ample opportunity as the rally continues
Buying the 30 YEAR BOND was indifferent
Buying the CAN$ was a brilliant trade. The YEN buy did nothing and the AUD buy was not so good
 
Only a reasonable week.
 
A busy week in terms of data and as it incorporates the first Friday of the month we have the all important NonFarm Payroll figure.
 
USD:The US$ Index closed slightly higher last week.
On Tuesday we have Consumer Confidence expected to dip slightly from 120.3 to 120.1.
On Thursday we have the usual Unemployment Claims which is estimated to rise from 234,000 to 239,000. This is followed by manufacturing PMI expected at 54.7 from the previous 54.8 and Crude Oil Inventories.
Friday is the big day when we have Average Hourly earnings anticipated to decline from 0.3% to 0.2%, NonFarm Payroll thought to decline from 211,000 to 186,000 and the Unemployment Rate which is thought to remain steady at 4.4%.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -40,400 last week to 37,302. We therefore remain SLIGHTLY BEARISH.
 
EURO:The EURO closed slightly against the USD last week.
Only one item for the EURO this week.
On Monday the ECB President speaks.
COT data for the Euro shows that large commercials significantly increased their net short position last week from -48,951 to -81,570. This continues to be a 52 week extreme and we therefore alter our view from BEARISH to VERY BEARISH.
 
GBP:The GBP closed sharply lower against the USD.
Two items for the GBP this week.
On Thursday we have manufacturing PMI thought to decline from 57.3 to 56.5.
Friday sees the release of Construction PMI also thought to fall from 53.1 to 52.7.
COT data shows that large commercials decreased their net long position from +32,005 to +22,479 last week. This continues to remain at a 52 week extreme so we alter our view from SLIGHTLY BULLISH to NEUTRAL.
 
YEN:The YEN was virtually unchanged 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 +82,358 to +68,837 last week. We therefore alter our view BULLISH to NEUTRAL.
 
AUD:The AUD closed down slightly against the USD last week.
Two items for the AUD this week.
On Wednesday we have both Private capital Expenditure and Retail sales. The former is thought to rise from -2.1% to +0.6% whilst the latter is also thought to rise from -0.1% to +0.3%.
COT data shows that large commercials slightly decreased their net long position from +8,986 to +8.515 last week. We therefore remain SLIGHTLY BULLISH.
 
CNY:Two items for the CNY this week.
On Tuesday we have both manufacturing and Non-Manufacturing PMI. The former is expected to decrease very slightly from 52.2 to 52.0.
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 last week. Large commercials substantially decreased their net short position from -29,977 to -16,826 last week. We therefore alter our view from BEARISH to SLIGHTLY BULLISH.
RUSSELL2000: The RUSSELL2000 rose sharply last week. Large commercials sharply increased their net long position from +35,799 to +68,195 last week. This is now a 52 week extreme and we therefore alter our view from SLIGHTLY BULLISH to BULLISH.
NASDAQ100:The NASDAQ100 rose sharply last week. Large commercials decreased their net short position from -75,189 to -71,506 last week. We therefore remain SLIGHTLY BEARISH.
VIX: Large commercials reduced their protection last week decreasing their net long position from +141,342 to +102,873. This is no longer a 52 week extreme so we alter our view from BULLISH on risk protection and NEGATIVE on risk to NEUTRAL on risk protection and SLIGHTLY BULLISH on risk.
 
COMMODITIES:
GOLD: GOLD rose sharply last week closing near its highs. Large commercials increased their net short position from -142,859 to -174,291 last week. This is no longer  a 52 week extreme. Now that large commercials hold a net short position which is lower than 200,000 we are bullish but as it is no longer a 52 week extreme we alter our view from BULLISH to NEUTRAL.
SILVER: SILVER closed slightly lower last week. Large commercials increased their net short position from -57,337 last week. This is no longer a 52 week extreme. We therefore alter our view from BULLISH to NEUTRAL.
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 increased their net short position from -7,288 to -10,729 last week. This is no longer a 52 week extreme. Large commercials generally carry a net neutral position. This is very close to a neutral position. We therefore remain NEUTRAL.
CRUDE OIL: CRUDE closed down last week. Large commercials slightly increased their net short position from -333,507 to -368,551 last week. We therefore remain SLIGHTLY BEARISH.
 
The gold:silver ratio decreased from 74.60 to 73.18 indicating silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND was virtually unchanged last week. Large commercials significantly decreased their net long position from +19,757 and are now net short -32,725 last week. This is now a 52 week extreme. We therefore alter our view from SLIGHTLY BULLISH to BEARISH.
 
OTHER FX:
CAN$: The CAN$ rose sharply higher last week. Large commercials increased their net long position from +108,684 to +112,104 last week. This continues to be a 52 week extreme and we therefore remain VERY BULLISH.
NZD:The NZD rose sharply closing on its highs last week. Large commercials decreased their net long position from +14,420 to +11,047 last week. We therefore remain SLIGHTLY BULLISH.
AUD/YEN:The AUD closed very slightly lower in this pair. COT the AUD showed a slight deterioration and more so for the YEN last week. This bodes well for risk in the short term.
 
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 we have numerous COT changes this week which all point to the following:
Risk is due to continue its move higher,
Precious metals are over extended on the upside in the short to medium term,
The 30 YEAR BOND is due a correction,
THE USD will bounce.
 
Therefore our recommendations for next week are:
Sell precious metals on any further strength and establish shorts
Buy risk
Sell the 30 YEAR BOND on any strength
Sell EURO and YEN
 
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