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10 Min Read
Delta Farm Press Staff
Dramatic Changes in the Business and Investment Landscape Underway
Problem: Economically the global economy has been slowly going to its knees with building global deflationary forces, due to
Chronic slow domestic and global growth due to
Governments’ deficit spending that produces unsustainable debt in country after country around the world, leading to
Historic low and building negative interest rates;
Social anxiety yields to “Populists Movements:”
Current populist movements’ have the tendency to lead to dangerous levels of social, political, and economic uncertainty and instability, including military friction.
Pre-Reflation Goal - Global Business, Market and Investment Landscape:
Pre-reflation, business managers, investors and investment managers globally assumed optimum returns must be achieved in a global economic setting of chronic slow growth, historic low to negative interest rates and building debt.
Today’s Global Business, Market and Investment Landscape:
“TODAY” market participants “BELIEVE” near term domestically and globally Governments and Central Bank Intervention will enhance growth and returns on investments, especially fixed investments. Reflation will be more bearish than bullish for safe haven assets like U.S. Treasuries, utilities, etc. as indicated by chart patterns, and bullish the dollar, U.S. equities and some other global equities as well as building support for future commodity price strength.
2017 Market Considerations
2017 expected to be a year of opportunity: First, tax and regulatory relief; Second, increasing domestic and global growth; Third, improved returns from fixed assets; Fourth, improved equity returns; Fifth, improved returns for the agricultural sector with improved commodity prices; Sixth, improved returns for the business sector in general; and Seventh, movement toward achieving inflationary goals; and Eight, belief and confidence in the economic momentum.
Biggest factors contributing a drag on economic activity in 2017: European Union instability, dollar strength from safe haven status, likely oil price firmness, trade and military friction, merging protectionism, and fiscal and monetary policy missteps by most countries.
2017 Summary Expectations:
10-Year US Treasury Yield: 2017 – 10-Year Treasuries expect some additional upside and trading range defined
US Dollar Index: 2017 – Dollar more strength than weakness, constraining dollar’s upside potential will have some success the first half of 2017
CRB Index: 2017 – A stronger CRB Index will emerge, due to global reflation, oil price strength, an improved supply and demand balance among commodities, a reasonably stable dollar in the first half of 2017
$WTIC Light Crude Oil: Likely primary range $40 to $60 with possible high in $72 area
Soybeans: 2017 – Pricing opportunities emerge as the year progressives
Corn: 2017 – This market may bottom sooner rather than later in 2017 with pricing opportunities
Rice: 2017 -Supply and demand balance improves allowing stronger pricing opportunities in the 2nd half of 2017
Cotton: 2017 - Bullish, prices fall below 68-cents corrective price action likely and revaluate upside price action expectations
Wheat: 2017 - Bottoming process underway pricing opportunities will emerge
SPY SPDR S&P 500 ETF: 2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact
QQQ NASDAQ Power Shares: 2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact
EFA iShares ETF: 2017 - Global Equities Excluding U.S. and Canada: 2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact. Anticipate this market has more strength than weakness in 2017
EEM iShares ETF, Emerging Market Equities: 2017 - 2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact. Anticipate this market has more strength than weakness in 2017
MCHI iShares ETF: 2017 - China Equities Available International Investors: 2017 – Neutral until price action defines market direction. Anticipate this market has more strength than weakness in 2017
Near Term Market Considerations Week Beginning January 2, 2016
Near Term Summary Considerations:
10-Year US Treasury Yield: Consolidating and/or correcting upside gains
US Dollar Index: Consolidating and/or correcting upside move
CRB Index: Consolidating, oil price defines direction, see oil next
$WTIC Light Crude Oil: Consolidating with corrective activity possible, but a market which appears in search of higher highs as year evolves
Soybeans: Neutral, price weakness now dominates
Corn: Neutral, this market acting more bullish than bearish
Rice: Neutral, price weakness remains problematic defined by global uncertainties
Cotton: Bullish, prices fall below 68-cents corrective price action likely, revaluate price expectations
Wheat: Neutral, price weakness into 3.60 area a possibility
SPY SPDR S&P 500 ETF: Neutral – Consolidating, prices may need to correct some of their gains
QQQ NASDAQ Power Shares: Neutral – Consolidating and likely corrective price action needed
EFA iShares ETF - Global Equities Excluding U.S. and Canada: Range Bound
EEM iShares ETF, Emerging Market Equities: Range Bound
MCHI iShares ETF - China Equities Available International Investors: Appears to be building momentum
Market-by-Market: Near Term Market Considerations Week Beginning January 2, 2016
Charts 1 - 3. $UST10Y - 10-Year US Treasury Yield
Primary Consideration:
Near-term, the 10-Year Treasury Yield consolidating and/or correcting upside gain
2017 – 10-Year Treasuries expect some additional upside and trading range defined
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 4 - 6. Power Shares US Dollar Index
Primary Considerations:
Neutral Near Term - Consolidating and/or correcting upside move
2017 – Dollar more strength than weakness, constraining dollar’s upside potential will have some success the first half of 2017
Thanks to the European Union’s unsustainable economic platform, global government excessive entitlements and inefficiencies contribution to unsustainable debt.
Global interventionist government and Central Bank activities will define dollar strength or weakness over the next 3 to 12 months
Charts 7 - 9. CRB Index
Primary consideration:
Consolidating, oil price defines direction
The CRB Commodity Index appears to be building a base to move higher, which near term would be a primary function of oil price strength leadership and a reasonably stable dollar
2017 – A stronger CRB Index will emerge, due to global reflation, oil price strength, an improved supply and demand balance among commodities, a reasonably stable dollar in the first half of 2017
Charts 10 - 12. $WTIC Light Crude Oil
Primary Consideration:
Consolidating with corrective activity possible, but this is a market which appears to be in search of higher highs due to a number of factors with one being anticipated improved supply and demand balance
2017 – Likely primary range $40 to $60 with possible high in $72 area
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 13 - 15. 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
2017 – Pricing opportunities emerge as the year progressives
Additional Thought:
Market participants appear to be building a risk appetite. Being short means at least having close mental stops
Charts 16 – 18. Corn
Primary consideration:
Neutral – Assume a retest of the previous low at $3.15 per bushel, but also consider his market continues to act more bullish than bearish
2017 – This market may bottom sooner rather than later in 2017 with pricing opportunities
Alternative consideration: (Looking more like the primary consideration)
Bottom in place and upside consideration to $4.15 per bushel
Charts 19 - 20. Rice
Primary consideration:
Neutral – Price weakness remains defined in part by global economic, political, and social uncertainties
2017 – Supply and demand balance improves as the year progress allowing stronger pricing opportunities in the 2nd half of 2017
Charts 21 - 23. 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
2017 – Bullish to 84-cent area, then reevaluate price strength or weakness, prices below 68-cents make sure price action is only corrective
Charts 24 - 26. Wheat
Primary consideration:
Neutral
Forming a price bottom
Price weakness into the $3.60 area remains a possibility
2017 – Bottoming process underway and pricing opportunities emerge as the year progressives
Alternative consideration:
Bottom in place, price consolidation underway before prices move higher
Charts 27 – 29. SPDR S&P 500 ETF
Primary Consideration:
Neutral – Consolidating, prices may need to correct some of their gains
2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact
Charts 30 - 32. QQQ NASDAQ Power Shares
Primary Consideration:
Neutral – Consolidating and likely corrective price action needed
2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact
Charts 33 - 35. EFA iShares ETF, Global Equities Excluding U.S. & Canada
Primary Consideration:
Range Bound
2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact. Anticipate this market has more strength than weakness in 2017
Charts 36 - 38. EEM iShares ETF, Emerging Market Equities
Primary Consideration:
Range Bound – Potentially Bullish
2017 – Neutral until understand fiscal and monetary policy’s potential direction and impact. Anticipate this market has more strength than weakness in 2017
Charts 39 - 41. 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
2017 – Neutral until price action defines market direction. Anticipate this market has more strength than weakness in 2017
Charts Book Index – Link
Chart 1. $UST10Y - 10-Year US Treasury Yield, Weekly Chart, 2012 – Dec. 30, 2016
Chart 2. $UST10Y - 10-Year US Treasury Yield, Daily Chart, May 2016 – Dec. 30, 2016
Chart 3. $UST10Y - 10-Year US Treasury Yield, Monthly Chart, 1997 – Dec. 30, 2016
Chart 4. Power Shares US Dollar Index, Weekly Chart, Dec. 2013 – Dec. 30, 2016
Chart 5. Power Shares US Dollar Index, Daily Chart, July 2016 – Dec. 30, 2016
Chart 6. Power Shares US Dollar Index, Monthly Chart, July 2016 – Dec. 30, 2016
Chart 7. $CRB Reuters/Jefferies CRB Index, Weekly Chart, September 2013 – Dec. 30, 2016
Chart 8. $CRB Reuters/Jefferies CRB Index, Daily Chart, May 2016 – Dec. 30, 2016
Chart 9. $CRB Reuters/Jefferies CRB Index, Monthly Chart, 2007 – Dec. 30, 2016
Chart 10. $WTIC, Weekly Chart, Dec. 2013 – Dec. 30, 2016
Chart 11. $WTIC, Daily Chart, May 2016 – Dec. 30, 2016
Chart 12. $WTIC, Monthly Chart, July 2005 – Dec. 30, 2016
Chart 13. Soybeans, Weekly Chart, September 2013 – Dec. 30, 2016
Chart 14. Soybeans, Daily Chart, May 2016 – Dec. 30, 2016
Chart 15. Soybeans, Monthly Chart, 15 Year Chart – Dec. 30, 2016
Chart 16. Corn, Weekly Chart, September 2013 – Dec. 30, 2016
Chart 17. Corn, Daily Chart, May 2016 – Dec. 30 2016
Chart 18. Corn, Monthly Chart, 2005 – Dec. 30, 2016
Chart 19. Rough Rice Jan '17 (ZRF17) CBOT, Quarterly, Continuation Chart, 1987 – Dec. 30, 2016
Chart 20. Rough Rice Jan '17 (ZRF17) CBOT, Daily Continuation Chart, August 2016 – Dec. 30, 2016
Chart 21. Cotton, Weekly Chart, September 2013 – Dec. 30, 2016
Chart 22. Cotton, Daily Chart, May 2016 – Dec. 30, 2016
Chart 23. Cotton, Monthly Chart, 2007 – Dec. 23, 2016
Chart 24. Wheat, Weekly Chart, September 2013 – Dec. 30, 2016
Chart 25. Wheat, Daily Chart, May 2016 – Dec. 30, 2016
Chart 26. Wheat, Monthly Chart, July 2016 – Dec. 30, 2016
Chart 27. SPDR S&P 500 ETF, Weekly Chart, September 2013 – Dec. 30, 2016
Chart 28. SPDR S&P 500 ETF, Daily Chart, May 2016 – Dec. 30, 2016
Chart 29. SPDR S&P 500 ETF, Monthly Chart, May 2016 – Dec. 30, 2016
Chart 30. QQQ NASDAQ Power Shares, Weekly Chart, September 2013 – Nov 18, 2016
Chart 31. QQQ NASDAQ Power Shares, Daily Chart, June 2016 – Dec. 30, 2016
Chart 32. QQQ NASDAQ Power Shares, Monthly Chart, 2007 – Dec. 30, 2016
Chart 33. EFA iShares ETF, Global Equities Excluding U.S. & Canada, Weekly Chart, May 2014 – Dec. 30, 2016
Chart 34. EFA iShares ETF, Global Excluding U.S. & Canada, Daily Chart, 2016 – Dec. 30, 2016
Chart 35. EFA iShares ETF, Global Excluding U.S. & Canada, Monthly Chart, 2007 – Dec. 23, 2016
Chart 36. EEM iShares ETF, Emerging Market Equities, Weekly Chart, 2014 – Dec. 30, 2016
Chart 37. EEM iShares ETF, Emerging Market Equities, Daily Chart, 2016 – Dec. 30, 2016
Chart 38. EEM iShares ETF, Emerging Market Equities, Monthly Chart, 2007 – Dec. 30, 2016
Chart 39. MCHI iShares ETF, China Equities available international investors, Weekly Chart, 2014 – Dec. 30, 2016
Chart 40. MCHI iShares ETF, China Equities available international investors, Daily Chart, 2016 – Dec. 30, 2016
Chart 41. MCHI iShares ETF, China Equities available international investors, Monthly Chart, 2011 – Dec. 30, 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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