What to expect from the markets this week, October 16, 2017

Market “Near Term” Snap Shot

·       Rice: Price action appears to be corrective with likely another leg to the upside

·       Cotton: Cotton needs to hold 67 cents if a potential bullish bias is to remain a near term consideration

·       Soybeans: Ever so slowly trying to regain bullish momentum, closing above $10.22 and holding implies a likely price bottom in place

·       Corn: Cautiously Bullish, but may need one more move lower before moving higher

·       Wheat: Holding $4.39 implies building a base for higher prices

·       10-year Treasury Yield: Remains in a Sideways-Trading-Range with a near term slight bullish bias or lower yield

·       U.S. Dollar: Possible corrective activity remains a possibility, but once complete the door is open for a decline to 87 or lower

·       Oil $WTIC: Ongoing sideways choppy price action likely continues this week

·       The $45 to $50 trading range likely has broadened to $45 to $55-plus

·       $CRB Commodity Index: Macro factors and chart structure imply cautious optimism. Global Government and Central Bank actual and anticipated intervention indicate a slow fruit bearing process underway

·       S&P 500: Primary trend remains up, but a cautionary time period with consolidation needed

·       Global Equities Excluding U.S. and Canada: Primary trend remains up, but a cautionary time period but interestingly trying to regain momentum

·       Feeder Cattle: Moving higher   

GLOBAL ECONOMY STRENGTHENING

The U.S. and world’s economies are showing signs of sustainable growth possibly through 2018 in large part due to Government and Central Bank ongoing intervention through simulative activities and attention to economic, social and political detail.

 This is no small accomplishment, and allows the avoidance of a near term domestic and global recession or worse. The future costs of avoiding a U.S. and global near term recession are likely high as we keep pushing economic, social, political, etc. problems down the road. That said, the near term costs of a U.S. and global recession would be highly deflationary and especially crippling to commodity prices.      

 The IMF in their October Economic Outlook report is forecasting an improving global economy for the remainder of 2017 and 2018, while acknowledging dangerous underlying crosscurrents. IMF real gross domestic product outlook follows: Click on link for more detail.

·       Global growth is projected at 3.6-percent in 2017 and 3.7-percent in 2018 (real gross domestic product growth)

o   Advanced economies 2.2

o   Emerging and Developing Asia 6.5

o   Emerging and Developing Europe 4.5

o   Emerging market and developing economies 4.6

o   Euro area 2.1

o   European Union 2.3

o   Latin America and the Caribbean 1.2

o   Major advanced economies (G7) 2

o   Middle East and North Africa 2.2

o   Middle East, North Africa, Afghanistan, and Pakistan 2.6

o   Other advanced economies 2.6

o   Sub-Saharan Africa 2.6

o   World 3.6

 In addition to the following “Expanded near Term Market Outlook Considerations for Week Beginning October 16, 2017”

·       Download Slide Show for charts and expanded details, Click Download Link

This Week’s Select Summary Considerations:

 10-year Treasury Yield

•        Remains in a Sideways-Trading-Range with a near term slight bullish bias or lower yield

•        Near term higher yields have been in part a function of U.S. and Global market intervention activities designed to extend the business cycle

•        If the yield moved above 3.00 then consideration would need to be given to a change in trend

•        Bond yields need to hold at 1.95 or serious consideration would need be given to ominous building economic problems

 U.S. Dollar Index:

•        Possible corrective activity remains a possibility, but once complete the door is open for a decline to 87 or lower

•        Given global macro considerations coupled with no significant global anomaly event moving forward this index may have some serious weakness

•        Unless Middle East, North Korean, European, Venezuelan or other anomaly events start to dominate market participant decisions, then we are still in search of a low for the dollar

CRB Index:

•        Macro factors and chart structure imply cautious optimism 

•        Global Government and Central Bank actual and anticipated intervention indicate a slow fruit bearing process underway

•        Bigger Picture: Though dangerously spastic, global macro and growth forces in general remain supportive of the commodity sector

    $WTIC Light Crude Oil:

•        Ongoing sideways choppy price action likely continues this week

•        The $45 to $50 trading range likely has broadened to $45 to $55-plus

•        A complex, volatile and an uncertain market that deserves a great deal of respect in a world with building economic, social, political and homeland security uncertainties

•        North Korea, market structure, geopolitical considerations and building possibilities of a Venezuelan civil war are just some of the supportive factors

 Soybeans:

•        Ever so slowly regaining bullish momentum, closing above $10.22 and holding implies a likely price bottom in place

•        A world awash in liquidity, building economic momentum and many hard assets seemingly overvalued, be careful not to overlook the possible attractiveness of this asset to buyers and investors

•        A Cautionary Consideration: Do not rule out a retest of the $9.00 area or potentially lower

Corn:

•        Searching for a low, so assume bearish until price action becomes more supportive of a bullish case and give consideration to prices possibly moving to their previous 2016 lows of $3.15 or below

 Long Grain Rice:

•        Price action appears to be corrective with likely another leg to the upside

•        Remain aware of potential near term uncertain global economic crosscurrents related to currencies, bonds, equities and commodities as they go through a rebalancing process

Cotton:

•        Cotton needs to hold 67-cents if a potential bullish bias is to remain a near term consideration

 Wheat:

•        Struggling, holding current levels at $4.39 important and implies possibly building a base for higher prices

•        SPY SPDR S&P 500 ETF:

•        Primary trend remains up

•        A cautionary time period with consolidation needed

•        Allow price action to provide guidance

•        $COMPQ Nasdaq Composite:

•        Consolidation needed

•        Near term remain cautious of this index with momentum slowing 

•        Allow price action to provide guidance

•        Primary trend remains up

•        EFA iShares ETF - Global Equities Excluding U.S. and Canada:

•        Primary trend remains up

•        A cautionary time period but interestingly trying to regain momentum

•        Allow price action to provide guidance

•        EEM iShares ETF, Emerging Market Equities:

•        A cautionary time period, but breaking out

•        Allow price action to provide guidance

Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System, Cooperative Extension Service. E-mail: [email protected].

Download Slide Show for charts and expanded details, Click Download Link

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