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Hundreds of round bales await ginning at the Bogue Chitto Gin Yard in east Mississippi.
In the last trading week of the year, seeing some price firmness in Chinese, Emerging Market, and U.S. equities as well as the oil and copper markets would provide a positive close for the week and potentially relieve some of the bearish price pressure in the cotton, rice and grain markets.
Weakness across the board this week would likely create real concerns about a continuation of price softness in cotton, rice and the grain markets.
Near Term Market Considerations Week Beginning Dec. 26, 2016:
Near Term Summary Expectations:
10-Year US Treasury Yield: Consolidating, additional yield strength expected.
US Dollar Index: Consolidating, more strength than weakness remains.
CRB Index: Consolidating, oil price likely defines direction, see oil next.
$WTIC Light Crude Oil: A market in search of higher highs.
Soybeans: Neutral, price weakness now dominates.
Corn: Neutral, price weakness bottoming process underway.
Rice: Neutral, price weakness remains problematic with global uncertainties.
Cotton: Bullish, prices fall below 68-cents corrective price action likely.
Wheat: Neutral, price weakness into 3.60 area a possibility.
SPY SPDR S&P 500 ETF: Bullish – Consolidating.
QQQ NASDAQ Power Shares: Bullish – Consolidating.
EFA iShares ETF - Global Equities Excluding U.S. and Canada, Range Bound.
EEM iShares ETF, Emerging Market Equities, Further price weakness becomes problematic.
MCHI iShares ETF - China Equities Available International Investors, Weakness disturbing for commodities in general.
Charts 1 and 2. $UST10Y - 10-Year US Treasury Yield
Primary Consideration:
Near-term, the 10-Year Treasury consolidating, before searching for a higher yield.
The Bond market topped (low yield) back in July anticipating domestic and global fiscal policy (infrastructure, etc.) stimulus activities would be elevated to a level to compliment ongoing monetary policy. Washington Leadership expected to be friendly to business and favor investing in equities, the dollar and commodities over bonds.
Charts 3 and 4. Power Shares US Dollar Index
Primary Considerations:
Bullish - Dollar running into resistance, consolidation likely, but near term expect more dollar strength than weakness.
Global interventionist government and Central Bank activities will define dollar strength or weakness over the next 3 to 12 months.
Dollar corrective activity could start in the next 2-4 weeks.
Charts 5 and 6. CRB Index
Primary consideration:
The CRB Commodity Index appears to be building a base to move higher, which would be a function of oil price strength leadership.
Charts 7 and 8. $WTIC Light Crude Oil
Primary Consideration:
This is a market which appears to be in search of higher highs.
A challenging market for a number of economic and geopolitical reasons.
Washington Leadership likely bullish U.S. production.
OPEC and others likely define price top.
Global uncertainties supportive of prices.
Charts 9 - 10. Soybeans
Primary Consideration:
Neutral - I remain more concerned about additional price weakness and the culmination of a bottoming process near term. Presently, downside price considerations to 9.23. This market is coiling for a major price move.
Alternative Consideration:
Considering global risks and uncertainties and building aggressive fiscal and monetary policy intervention activities argue a price bottom is in place or near.
Additional Thought:
Market participants appear to be building a risk appetite. Being short means at least having close mental stops.
Charts 11 – 12. Corn
Primary consideration:
Neutral – Remains range bound, likely a retest of the previous low at $3.15 per bushel, maybe lower.
Alternative consideration:
Bottom in place and upside consideration to $4.15 per bushel.
Charts 13 and 14. Rice
Primary consideration:
Price weakness remains defined in part by global uncertainties.
Charts 15 and 16. Cotton
Primary Consideration:
Bullish prices likely into the 84-cent area. Near term if prices fall below 68-cents, then likely corrective price activity underway.
Charts 17 and 18. Wheat
Primary Consideration:
Neutral
Forming a price bottom.
Price weakness into the $3.60 area a possibility.
Charts 19 – 20. SPDR S&P 500 ETF
Primary Consideration:
Bullish – Consolidating.
Charts 21 - 22. QQQ NASDAQ Power Shares
Primary Consideration:
Bullish – Consolidating.
Charts 23 - 24. EFA iShares ETF, Global Equities Excluding U.S. & Canada
Primary Consideration:
Range Bound – Potentially Bullish above 200 day moving average.
Charts 25 - 26. EEM iShares ETF, Emerging Market Equities
Primary Consideration:
Price action needs to provide some leadership this week. A further break-down in prices would likely be negative for the commodity sector.
Charts 27 - 28. MCHI iShares ETF, China Equities available international investors
Primary Consideration:
This is a China ETF showing far more weakness than one would like to see. The key question for the row crop sector – What is the impact to near term soybean, corn, wheat, cotton, and rice prices? Studying this chart one can certainty feel the underlying presence of global economic, social and political uncertainties.
Charts Book Index – Link
Chart 1. $UST10Y - 10-Year US Treasury Yield, Weekly Chart, 2012 – Dec. 23, 2016
Chart 2. $UST10Y - 10-Year US Treasury Yield, Daily Chart, May 2016 – Dec. 23, 2016
Chart 3. Power Shares US Dollar Index, Weekly Chart, Dec. 2013 – Dec. 23, 2016
Chart 4. Power Shares US Dollar Index, Daily Chart, July 2016 – Dec. 23, 2016
Chart 5. $CRB Reuters/Jefferies CRB Index, Weekly Chart, September 2013 – Dec. 23, 2016
Chart 6. $CRB Reuters/Jefferies CRB Index, Daily Chart, May 2016 – Dec. 23, 2016
Chart 7. $WTIC, Weekly Chart, Dec. 2013 – Dec. 23, 2016
Chart 8. $WTIC, Daily Chart, May 2016 – Dec. 23, 2016
Chart 9. Soybeans, Weekly Chart, September 2013 – Dec. 23, 2016
Chart 10. Soybeans, Daily Chart, May 2016 – Dec. 23, 2016
Chart 11. Corn, Weekly Chart, September 2013 – Dec. 23, 2016
Chart 12. Corn, Daily Chart, May 2016 – Dec. 23 2016
Chart 13. Rough Rice Jan '17 (ZRF17) CBOT, Quarterly, Continuation Chart, 1987 – Dec. 23, 2016
Chart 14. Rough Rice Jan '17 (ZRF17) CBOT, Daily Continuation Chart, August 2016 – Dec. 23, 2016
Chart 15. Cotton, Weekly Chart, September 2013 – Dec. 23, 2016
Chart 16. Cotton, Daily Chart, May 2016 – Dec. 23, 2016
Chart 17. Wheat, Weekly Chart, September 2013 – Dec. 23, 2016
Chart 18. Wheat, Daily Chart, May 2016 – Dec. 23, 2016
Chart 19. SPDR S&P 500 ETF, Weekly Chart, September 2013 – Dec. 23, 2016
Chart 20. SPDR S&P 500 ETF, Daily Chart, May 2016 – Dec. 23, 2016
Chart 21. QQQ NASDAQ Power Shares, Weekly Chart, September 2013 – Nov 18, 2016
Chart 22. QQQ NASDAQ Power Shares, Daily Chart, June 2016 – Dec. 23, 2016
Chart 23. EFA iShares ETF, Global Equities Excluding U.S. & Canada, Weekly Chart, May 2014 – Dec. 23, 2016
Chart 24. EFA iShares ETF, Global Excluding U.S. & Canada, Daily Chart, 2016 – Dec. 23, 2016
Chart 25. EEM iShares ETF, Emerging Market Equities, Weekly Chart, 2014 – Dec. 23, 2016
Chart 26. EEM iShares ETF, Emerging Market Equities, Daily Chart, 2016 – Dec. 23, 2016
Chart 27. MCHI iShares ETF, China Equities available international investors, Weekly Chart, 2014 – Dec. 23, 2016
Chart 28. MCHI iShares ETF, China Equities available international investors, Daily Chart, 2016 – Dec. 23, 2016
Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected].
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