Weekly Fundamentals - 18 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 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.”
 
Now let's see how we fared on our recommendations:
Staying either short or flat for the precious metals was good.
Continued selling of the commodity backed currency was also good as the AUD and CAN $ showed a little strength and the NZD a little weakness.
Staying away from risk was also good.
 
A good week.
 
An extremely quiet week in terms of data. However on Thursday, Friday and Saturday we have the Jackson Hole Symposium whichis attended by central bankers, finance ministers, academics, and financial market participants from around the world. The meetings are closed to the press but officials usually talk with reporters throughout the day. Comments and speeches from central bankers and other influential officials can create significant market volatility.
 
USD:The US$ Index closed up reasonably last week.
On Wednesday we have Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims figure expected at 237,000 from 232,000.
Finally on Friday Core Durable Goods Orders is expected to rise from 0.1% to 0.4%.
COT data shows that large commercials slightly increased their net short position in the US$ Index from -4,040 to -4,814 last week. This remains close to a 52 week extreme so we remain BULLISH.
 
EURO:The EURO closed reasonably lower against the USD last week.
On both Wednesday and Friday the ECB President speaks.
COT data for the Euro shows that large commercials decreased their net short position last week from -121,790 to -104,369. This remains close to a 52 week low so we remain VERY BEARISH.
 
GBP:The GBP fell reasonably against the USD last week.
On Thursday we have the GDP number which is expected to remain unchanged at 0.3%.
COT data shows that large commercials increased their net long position from +20,738 to +33,275 last week. This continues to be close to a 52 week low so we remain BEARISH.
 
YEN:The YEN closed 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 +110,169 to +89,173 last week. This is no longer close to a 52 week extreme. We therefore alter our view from BULLISH to SLIGHTLY BULLISH.
 
AUD:The AUD rose reasonably against the USD last week.
There is no data for the AUD this week.
COT data shows that large commercials slightly increased their net short position from -75,475 to -77,465 last week. This remains close to a 52 week extreme so we remain VERY BEARISH.
 
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 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 decreased their net long position from +45,150 and are now net short -17,113 last week. We therefore alter our view from NEUTRAL to BEARISH.
NASDAQ100:The NASDAQ100 closed reasonably lower last week. Large commercials increased their net short position from -33,983 to -35,508 last week. We therefore remain NEUTRAL.
VIX: VIX closed sharply higher last week.
Large commercials slightly decreased their protection last week decreasing their net long position from +148,914 to +133,035. This remains close to a 52 week extreme so remain BULLISH on risk protection and BEARISH on risk.
 
COMMODITIES:
GOLD: GOLD fell slightly last week. Large commercials increased their net short position from -159,511 to -196,631 last week. This is now very close to the -200,000 figure so we alter our view from SHORT TERM CAUTIOUS to BEARISH.
SILVER: SILVER fell slightly last week. Large commercials very slightly decreased their net short position from -39,561 to -48,088 last week. We therefore remain SHORT TERM CAUTIOUS.
COPPER: COPPER rose slightly last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net short position -33,927 to -37,145. Large commercials generally carry a net neutral position. This is no longer a neutral position. We therefore remain SLIGHTLY BEARISH.
CRUDE OIL: CRUDE fell slightly last week. Large commercials slightly decreased their net short position from -476,742 to -473,499 last week. We therefore remain SLIGHTLY BEARISH.
 
The gold:silver ratio increased from 75.36 to 75.81 indicating slight silver underperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose slightly last week. Large commercials increased their net short from -53,029 to -69,815 last week. This is now close to a 52 week extreme so we therefore remain BEARISH.
 
OTHER FX:
CAN$: The CAN$ rose reasonably against the USD last week. Large commercials increased their net short position from -61,484 to -69,109. This remains close to a 52 week extreme. We therefore remain VERY BEARISH.
NZD:The NZD fell slightly against the USD last week. Large commercials decreased their net short position from -35,892 to -27,585 last week. This remains close to a 52 week extreme and we therefore remain VERY BEARISH.
AUD/YEN:The AUD closed higher in this pair. COT data for the AUD showed slight deterioration for the AUD and meaningful deterioration for the YEN last week. This means that the view towards risk should become more benign over the coming weeks.
 
THOUGHTS FOR NEXT WEEK
A number of changes in COT readings this week.
YEN has turned from BULLISH to SLIGHTLY BULLISH.
S&P500 from NEUTRAL to BEARISH.
GOLD form CAUTIOUS to BEARISH.
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:

Go short the precious metals.

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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Stay nimble. Good luck trading.
 

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