Weekly Fundamentals - 12 August 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report last week we wrote:
“No major changes in COT this week.
The USD Index continues to fail to make new highs. This continues to bode well for precious metals in the long term.
However COT for both gold and silver continue to warrant short term caution.
Commodity backed currencies especially the AUD, CAN$ and NZD continue to be worrying.
 
Therefore our recommendations based on our COT readings for next week are as follows:
Short term traders should go short the precious metals whilst longer term traders should remain flat.
Continue selling the AUD, CAN$ and NZD into strength.
Stay away from risk.
Buy VIX on any dips below 10.”
 
Now let's see how we fared on our recommendations:
Going short precious metals for ST traders and being flat for LT traders was premature.
Selling the AUD, CAN$ and NZD was a good call.
Staying away from risk was also good.
Buying VIX below 10 was excellent.
 
A good week.
 
A quiet week in terms of data.
 
USD:The US$ Index closed down reasonably last week.
On Tuesday we have both Core Retail sales and Retail Sales.
On Wednesday we have Building Permits, Crude Oil Inventories and the FOMC Meeting Minutes.
Finally on Thursday we have the usual Unemployment Claims figure.
COT data shows that large commercials slightly increased their net short position in the US$ Index from -3,773 to -4,040 last week. This remains close to a 52 week extreme so we remain BULLISH.
 
EURO:The EURO closed marginally higher against the USD last week.
Again there is no data for the EURO this week.
COT data for the Euro shows that large commercials increased their net short position last week from -108,561 to -121,790. This is a 52 week low so we remain VERY BEARISH.
 
GBP:The GBP fell marginally against the USD last week.
On Tuesday we have CPI.
On Wednesday we have the Average Earnings Index.
Finally on Thursday we have Retail sales.
COT data shows that large commercials slightly decreased their net long position from +23,107 to -20,738 last week. This continues to be close to a 52 week low so we remain BEARISH.
 
YEN:The YEN closed sharply higher against the USD last week.
On Sunday we have the Preliminary GDP number.
COT data shows that large commercials decreased their net long position from +124,932 to +110,169 last week. This continues to be close to a 52 week extreme. We therefore remain BULLISH.
 
AUD:The AUD fell reasonably against the USD last week.
On Monday we have the Monetary Policy Meeting Minutes.
Wednesday sees the release of Employment Change and the Unemployment Rate.
COT data shows that large commercials slightly decreased their net short position from -79,588 to -75,475 last week. This remains close to a 52 week extreme so we remain VERY BEARISH.
 
CNY: Two items for the CNY this week.
On Sunday we have both Industrial Production and Fixed Asset Investment.
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 fell strongly last week. Large commercials increased their net long position from+29,595 to +45,150 last week. We therefore remain NEUTRAL.
RUSSELL2000: We are removing COT analysis on the RUSSELL2000 due to the inconsistency in the figures. We may return to this in the future if we feel the data becomes more accurate and consistent.
NASDAQ100:The NASDAQ100 closed sharply lower last week. Large commercials decreased their net short position from -50,092 to -33,983 last week. We therefore alter our view from SLIGHTLY BEARISH to NEUTRAL.
VIX: VIX closed sharply higher last week.
Large commercials slightly decreased their protection last week decreasing their net long position from +155,490 to +148,914. This remains close to a 52 week extreme so remain BULLISH on risk protection and BEARISH on risk.
 
COMMODITIES:
GOLD: GOLD rose sharply last week. Large commercials increased their net short position from -143,385 to -159,511 last week. Now that large commercials hold a net short position which is lower than 200,000 but is no longer at a 52 week extreme so we remain SHORT TERM CAUTIOUS.
SILVER: SILVER rose sharply last week. Large commercials very slightly decreased their net short position from -39,667 to 39,561 last week. We therefore remain SHORT TERM CAUTIOUS.
COPPER: COPPER rose reasonably last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net short position from -32,561 to -33,927. Large commercials generally carry a net neutral position. This is no longer a neutral position. We therefore remain SLIGHTLY BEARISH.
CRUDE OIL: CRUDE rose slightly last week. Large commercials slightly decreased their net short position from -486,135 to -476,742 last week. We therefore remain SLIGHTLY BEARISH.
 
The gold:silver ratio decreased from 77.54 to 756.36 indicating meaningful silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose sharply last week. Large commercials increased their net short from -32,317 to -53,029 last week. We remain alter our view from SLIGHTLY BEARISH to BEARISH.
 
OTHER FX:
CAN$: The CAN$ fell slightly against the USD last week. Large commercials increased their net short position from -41,516 to -61,484. This remains a 52 week extreme. We therefore remain VERY BEARISH.
NZD:The NZD fell sharply against the USD last week. Large commercials slightly decreased their net short position from -37,567 to 35,892 last week. This remains close to a 52 week extreme and we therefore remain VERY BEARISH.
AUD/YEN:The AUD closed sharply lower in this pair. COT data for the AUD showed slight improvement for the AUD and slight deterioration for the YEN last week. This means that the view towards risk will become more benign over the coming weeks if this trend continues.
 
THOUGHTS FOR NEXT WEEK
No major changes in COT this week with the exception that risk will become less unattractive over the next few sessions.
A good indicator to follow is COT readings for the US 30 YEAR BOND which is deteriorating quickly.
The USD Index continues to fail to make new highs. This continues to bode well for precious metals in the long term.
However COT for both gold and silver continue to warrant short term caution.
Commodity backed currencies especially the AUD, CAN$ and NZD continue to be worrying.
 
Therefore our recommendations based on our COT readings for next week are as follows:
Short term traders should go short the precious metals whilst longer term traders should remain flat.
Continue selling the AUD, CAN$ and NZD into strength.
Stay away from risk but be prepared to cover shorts into any meaningful weakness
Watch the 30 YEAR BOND closely.

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