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Weekly Fundamental and COT Report – 25 October 2015
Last week we wrote that COT data had begun to weigh on commodities and that we had to be slightly cautious in the short term.
We were right. The week was not a happy one for commodities as further hints from the ECB that QE was potentially again on the cards meant that the USD rallied, risk rallied and commodities fell.
This week’s COT data tells the same story if not even more so.
The week is relatively light in terms of economic data with the exception of the USD which is particularly heavy.
USD:On Tuesday we have Core Durable Goods Orders expected to rise from last month’s -0.2% to 0.0%. We also have Consumer Confidence expected to be slightly lower from last month’s 103 to 102.5.
On Wednesday we have the FOMC Statement as well as the Fed Funds Rate which is expected to remain unchanged at 0.25%.
Thursday sees the release of GDP which is expected to show growth of 1.6% from last month’s growth of 3.9%. We also have the customary Unemployment Claims figure expected at 264,000.
Lastly on Friday we the Employment Cost Index which measures the change in the price businesses and the government pay for civilian labour. This is expected to rise from 0.2% to 0.6% this month.
COT data shows that large commercials strongly decreased their net short position in the US$ Index from 44,938 to 34,750. We therefore have to alter our position from SLIGHTLY BEARISH to SLIGHTLY BULLISH.
EURO:There is only one item of note for the Euro this week.
On Monday we have the German Business Climate number which is expected at 108.1 from last month’s 108.5.COT data for the Euro shows that large commercials decreased their net long position from 97,015 to 79,329. We therefore amend our position from SLIGHTLY BULLISH to NEUTRAL.
GBP: Only one item for the GBP this week.
On Tuesday we have the GDP number which is expected to be 0.6% from last month’s 0.7%.
Of most interest is the COT data below.
COT data for GDP shows that large commercials have massively altered their view on the GBP. They have moved from last week’s net long position of 22,519 to a net short position of 345. This is a huge weekly move and it therefore leaves us with no other option than to alter our view from SLIGHTLY BULLISH to VERY BEARISH. YEN: A busy week for the YEN.
We start on Tuesday with Retail Sales expected to fall from last month’s 0.8% to 0.5%.
On Thursday we have Household Spending expected to fall from 2.9% to 1.2%.
Also on Thursday we have Tokyo Core CPI unchanged at -0.2% and the important Monetary Policy Statement.
On Friday we have the BOJ Outlook Report and the BOJ Press Conference.
COT data shows that large commercials continue to reduce their net long position from 21,756 to 13,067. We maintain our NEUTRAL stance.AUD: Only one item for the AUD.
On Tuesday we have the CPI figure which is expected to remain unchanged from last month’s 0.7%.
COT data shows that large commercials very slightly increased their net long position from 47,727 to 50,636. We therefore maintain our position of NEUTRAL.
CNY: Only one item for the CNY this week.
On Saturday we have Manufacturing PMI.There is no COT data for the CNY.
COT DATA OF NOTE:
S&P500: Last week large commercials increased their net long position from 149,134 to 185,049. This remains very close to last week’s 52 week rolling high. We therefore have to continue to be BULLISH.GOLD: Large commercials continue to substantially increase their net short position moving from 118,494 to 163,300. Any large commercial short position greater than 100,000 is negative. We therefore maintain our stance of BEARISH.SILVER: Whilst COT for gold looks bad, for silver it is miserable. Large commercials substantially increased their net short position for a third week in a row. Last week saw them increase from 58,626 to 66,800. This is now the largest 52 week net short achieved. We therefore remain BEARISH for the third week in a row.THOUGHTS FOR NEXT WEEK
As last week, this week continues to hinge on the USD and also this Wednesday’s FOMC Statement.
Readers must remember that COT data is compiled to each week’s Tuesday so all the figures quoted above do not take the last three days of the week into account.
This means that the figures may have altered quite dramatically after the USD rally in the latter half of last week.
We go on record here to state that we STRONGLY believe recent price action in the USD is and will be short lived. It has already priced in the upcoming FOMC Statement and we are strongly of the opinion that, post the statement on Wednesday commodities will resume their uptrend and the USD its downtrend.
Next week’s COT data will therefore make for much better reading.
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