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May 22, 2017
3 Min Read
Bobby Coats and Bert Greenwalt, agricultural economists with the University of Arkansas and Arkansas State University, catch up at the Agricultural Council of Arkansas annual meeting in Little Rock.
Commodity Index Strengthening
What to expect from the markets this week, May 22, 2017
(To view this week's slides, click on accompanying charts)
Market “Near Term” Snap Shot
10-year Treasury Yield: Slightly bullish – lower yield
S&P 500: Likely consolidates for a period before moving higher
Global Equities: Some consolidating gains; others near term bullish; any significant corrective activity in the S&P 500 will spill-over into many global equities
U.S. Dollar: Sideways - More weakness than strength; in general a positive for commodities
Oil: Dangerous price weakness has given way to a price rebound; inability to maintain price momentum could result in another leg down for oil prices and add to aggregate commodity price weakness
Commodity Index: Good news: Near term low in place; Important question: Can upside momentum be sustained? The possibility appears likely. This could be an important week in defining general commodity price direction
Soybeans, Corn and Wheat: Basing Continues – Bias: Cautiously Bullish; Firmness to strength in the $CRB commodity index likely supportive of grain prices
Rice: Slightly bullish bias
Cotton: 84-cent-plus price objective achieved; Does additional price upside exist? That is to be determined.
In addition to the following “Expanded near Term Market Considerations Week Beginning May 22, 2017”
Download Slide Show for charts and expanded details from the accompanying charts:
This Week’s Select Summary Considerations:
10-Year US Treasury Yield:
We enter the week slightly bullish with a potentially lower yield
Event Risk Concerns or Economic Weakness will likely take yields lower to 2 or below over the next 1 to 2-plus months
As global events unfold (economic, social, political, etc.) chart activity will provide guidance
US Dollar Index:
For a period: The dollar should have more weakness than strength against the Euro
Big Picture: The dollar has a bullish bias given global economic, social, political and military challenges
Unless Middle East, North Korean, European, other anomaly events start to dominate market participant decisions for a period, then we are still DEFINING a trading range 95 -104
CRB Index:
Remain cautious, but it appears that the index has or is forming a bottom
Bigger Picture: Global macro forces in general remain supportive of the commodity sector
For the CRB Commodity Index to breakout will likely be a function of oil price leadership and/or broad commodity support, a reasonably stable to weaker dollar and belief and confidence in global fiscal, monetary, trade and regulatory policy leadership
$WTIC Light Crude Oil:
Once again oil prices have overcome fundamental weakness, but near-term prices remain in 45 to 55 dollar trading range. Will oil prices retest the top of the range at 55-dollars given the OPEC meeting this week?
As always, remain focused on the bigger “Geopolitical Picture and Building Military Friction”
Additional price weakness from current levels will likely be problematic for the $CRB Index and commodity sector
Soybeans:
Price floor likely in place, painful basing process underway
Secondary Consideration: A resumption of commodity index weakness, a likely function of Fiscal and Monetary Policy and Global Economic Uncertainties, could translate into a final price low
Corn:
Basing period underway followed by upward price momentum
Cautionary Note: A resumption of oil price weakness could possibly be problematic for corn prices
Long Grain Rice:
Slight bullish bias, near term weather and aggregate commodity market price momentum supportive of rice prices
This is a highly complex market with an array of factors impacting price from 2016/2017 fundamentals; 2017 acreage, production and quality uncertainties; present underlying aggregate commodity sector dynamics; problematic global economic momentum, geopolitical uncertainties, and/or global agronomic outlook
Cotton:
84-cent price level achieved
Time to watch price action for price strength or weakness expectations
Wheat:
Bullish price potential to $4.71 to $5.51 remains a possibility
SPY SPDR S&P 500 ETF:
Caution – Consolidation period
Allow price action to unfold
Larger trend remains up
QQQ NASDAQ Power Shares:
Momentum slowing
Allow price action to unfold
Larger trend remains up
EFA iShares ETF - Global Equities Excluding U.S. and Canada:
Trend remains up
EEM iShares ETF, Emerging Market Equities:
Entering a cautionary period
Trend remains up
Dr. Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected]
DISCLAIMER-FOR-EDUCATIONAL-PURPOSES
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