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Bobby Coats
January 17, 2017
8 Min Read
Keeping up with presidential and congressional activity and understanding the potential impact over the next 100 days and beyond will be very challenging. In addition, the U.S. Federal Reserve Board will provide its own brand of stimulative mental activities.
An accelerated movement is only days from transitioning U.S. fiscal and monetary policy away from:
A chronic low inflation to an aggressive stimulative reflation economic setting
S. Central Bank’s monetary accommodation to managing economic activity in a rising interest rate environment.
Recognize that past government and Central Bank intervention was not asleep at the switch. 2016 was a busy year domestically and globally for fiscal and monetary policy activities. Governments and Central Bank’s stimulative and accommodative activities to alleviate chronic slow growth and low to negative interest rates are presently showing positive results.
Couple that with present expectations, anticipation, and belief that the U.S. presidential and congressional leadership will accelerate and build on past accomplishments, then 2017 is setting up to be an interesting transition year.
Soybeans, corn and wheat
Soybeans, corn and wheat appear to be coming into the week of Jan. 16, 2017 with the wind at their back from a fundamental, technical, and macro perspective. The commodity complex in general is showing price firmness. This is in part due to:
Low market volatility;
Interest rate stability;
A pause in dollar strength;
Building currency strength in several commodity-based countries;
A increasingly bullish-acting commodity index;
Firmness in energy and copper prices;
The continued positive trend in U.S. equity prices;
Improving price strength in Chinese and emerging equity markets and in the global equity market in general.
Near-term market considerations week beginning Jan. 16, 2017
Near Term Summary Considerations:
10-Year US Treasury Yield: Acting a little bullish with a lower yield potential
US Dollar Index: Correcting upside move underway or possible sideways consolidation for a period
CRB Index: Bullish acting as evolving global macro forces supportive and providing green-shoot inflationary support, presently oil price key factor in defining index direction
$WTIC Light Crude Oil: Fascinating market, but a market which appears in search of higher highs, some corrective price action should be anticipated
Soybeans: Near-term price strength emerging, which makes one revisit 2016 price action in March, April and May.
Corn: This market acting more bullish than bearish, patience will be rewarded
Rice: Price weakness remains defined in part by global economic, political and social uncertainties. Overplanting in 2017 given present fundamentals would provide added market challenges
Cotton: Bullish, if prices fall below 68-cents corrective price action likely, re-evaluate price expectations
Wheat: Bullish acting and building momentum
SPY SPDR S&P 500 ETF: Trend remains positive, prices may need to correct some of their gains
QQQ NASDAQ Power Shares: Another weekly record high, corrective price action needed, but not required
EFA iShares ETF - Global Equities Excluding U.S. and Canada: Building momentum
EEM iShares ETF, Emerging Market Equities: Range bound –Potentially bullish – Positive for commodities in general
MCHI iShares ETF - China Equities Available International Investors: Potentially bullish, momentum appears to be building
Market-by-market: near-term market considerations week beginning Jan. 16, 2017
Charts 1 - 3. $UST10Y - 10-Year US Treasury Yield
Primary Consideration:
Neutral: the 10-Year Treasury Yield acting a little bullish with a lower yield potential
Given market structure presently financial institutions and borrowers are winners at these levels
Some suggest the 35-year bull bond market will be over with a yield that holds at 2.6, others at 3.0; I am more in the camp of 3.5. Actually, global fiscal and policy intervention may make picking points a little premature.
Presently we simply need to see how the chart activity unfolds.
Charts 4 - 6. Power Shares US Dollar Index
Primary Considerations:
Neutral - Correcting upside move underway. The following determines sideways consolidation for a period or a resumption of the Dollars move to the upside:
2017 European Union management/mismanagement a key factor in dollar strength or weakness in year ahead
Bigger Picture: Global interventionist government and Central Bank activities will define dollar strength or weakness over the next 3 to 12 months, especially President-elect Trump’s currency policy objectives
Charts 7 - 9. CRB Index
Primary consideration:
Bullish acting as evolving global macro forces supportive and providing green-shoot inflationary support, presently oil price key factor in defining index 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/or broad commodity support, reasonably stable dollar, and belief and confidence in the near term future
Charts 10 - 12. $WTIC Light Crude Oil
Primary Consideration:
Fascinating market, but a market which appears in search of higher highs, some corrective price action should be anticipated
2017 – Likely primary range $40 to $60 with possible high in $72 area
A challenging market being influenced by economic and geopolitical issues
Washington Leadership likely bullish U.S. production
OPEC and other oil producers have major role in defining 2017 price structure
Global uncertainties supportive of prices
Charts 13 - 15. Soybeans
Primary Consideration:
Neutral – Near term price strength emerging, which makes one revisit 2016 price action in March, April and May. I remain 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, upside or downside still to be determined
2017 – Pricing opportunities emerge as the year progresses
Alternative Consideration:
Considering global risks and uncertainties and building aggressive fiscal and monetary policy intervention activities argue a price bottom is in place
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 this market continues to act more bullish than bearish, which maybe exactly why this market may revisit the previous low
2017 – Pricing opportunities emerge as the year progresses in corn, soybeans, and wheat
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
Overplanting in 2017 without additional demand source could be highly problematic for 2017 marketing year prices
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
Charts 24 - 26. Wheat
Primary consideration:
Bullish Acting, building momentum
Charts 27 – 29. SPDR S&P 500 ETF
Primary Consideration:
Trend remains positive
Prices may need to correct some of their gains
Charts 30 - 32. QQQ NASDAQ Power Shares
Primary Consideration:
Closed week at record high, likely corrective price action needed, but not required
Charts 33 - 35. EFA iShares ETF, Global Equities Excluding U.S. & Canada
Primary Consideration:
Building momentum
The weeks of January 2 and 9, 2017 were good weeks, follow through the week of January 15, 2017 would be a positive for commodities in general.
Charts 36 - 38. EEM iShares ETF, Emerging Market Equities
Primary Consideration:
Range Bound – Potentially Bullish – Positive for commodities in general
Charts 39 - 41. MCHI iShares ETF, China Equities available international investors
Primary Consideration:
Potentially Bullish
Momentum appears to be building
Charts Book Index – Link
Chart 1. $UST10Y - 10-Year US Treasury Yield, Weekly Chart, 2014 – Jan. 13, 2017
Chart 2. $UST10Y - 10-Year US Treasury Yield, Daily Chart, May 2016 – Jan. 13, 2017
Chart 3. $UST10Y - 10-Year US Treasury Yield, Monthly Chart, 2005 – Jan. 13, 2017
Chart 4. Power Shares US Dollar Index, Weekly Chart, 2014 – Jan. 13, 2017
Chart 5. Power Shares US Dollar Index, Daily Chart, July 2016 – Jan. 13, 2017
Chart 6. Power Shares US Dollar Index, Monthly Chart, August 2007 – Jan. 13, 2017
Chart 7. $CRB Reuters/Jefferies CRB Index, Weekly Chart, November 2013 – Jan. 13, 2017
Chart 8. $CRB Reuters/Jefferies CRB Index, Daily Chart, July 2016 – Jan. 13, 2017
Chart 9. $CRB Reuters/Jefferies CRB Index, Monthly Chart, 1997 – Jan. 13, 2017
Chart 10. $WTIC, Weekly Chart, 2014 – Jan. 13, 2017
Chart 11. $WTIC, Daily Chart, July 2016 – Jan. 13, 2017
Chart 12. $WTIC, Monthly Chart, 1997 – Jan. 13, 2017
Chart 13. Soybeans, Weekly Chart, 2014 – Jan. 13, 2017
Chart 14. Soybeans, Daily Chart, July 2016 – Jan. 13, 2017
Chart 15. Soybeans, Monthly Chart, 1997 – Jan. 13, 2017
Chart 16. Corn, Weekly Chart, 2014 – Jan. 13, 2017
Chart 17. Corn, Daily Chart, July 2016 –Jan. 13, 2017
Chart 18. Corn, Monthly Chart, 1997 – Jan. 13, 2017
Chart 19. Rough Rice Mar '17 (ZRF17) CBOT, Quarterly, Continuation Chart, 1987 – Jan. 13, 2017
Chart 20. Rough Rice Mar '17 (ZRF17) CBOT, Daily Chart, Feb. 2016 – Jan. 13, 2017
Chart 21. Cotton, Weekly Chart, 2014 – Jan. 13, 2017
Chart 22. Cotton, Daily Chart, July 2016 – Jan. 13, 2017
Chart 23. Cotton, Monthly Chart, 1997 – Jan. 13, 2017
Chart 24. Wheat, Weekly Chart, 2014 – Jan. 13, 2017
Chart 25. Wheat, Daily Chart, July 2016 – Jan. 13, 2017
Chart 26. Wheat, Monthly Chart, 1997 – Jan. 13, 2017
Chart 27. SPDR S&P 500 ETF, Weekly Chart, 2014 – Jan. 13, 2017
Chart 28. SPDR S&P 500 ETF, Daily Chart, May 2016 – Jan. 13, 2017
Chart 29. SPDR S&P 500 ETF, Monthly Chart, 2005 – Jan. 13, 2017
Chart 30. QQQ NASDAQ Power Shares, Weekly Chart, 2014 – Dec. 30, 2017
Chart 31. QQQ NASDAQ Power Shares, Daily Chart, July 2016 – Jan.13, 2017
Chart 32. QQQ NASDAQ Power Shares, Monthly Chart, 1997 – Jan. 13, 2017
Chart 33. EFA iShares ETF, Global Equities Excluding U.S. & Canada, Weekly Chart, May 2014 – Jan. 13, 2017
Chart 34. EFA iShares ETF, Global Excluding U.S. & Canada, Daily Chart, Feb. 2016 – Jan. 1, 2017
Chart 35. EFA iShares ETF, Global Excluding U.S. & Canada, Monthly Chart, 1997 – Jan. 13, 2017
Chart 36. EEM iShares ETF, Emerging Market Equities, Weekly Chart, 2014 –Jan. 13, 2017
Chart 37. EEM iShares ETF, Emerging Market Equities, Daily Chart, Feb. 2016 – Jan. 13, 2017
Chart 38. EEM iShares ETF, Emerging Market Equities, Monthly Chart, 1997 – Jan. 13, 2017
Chart 39. MCHI iShares ETF, China Equities available international investors, Weekly Chart, 2014 – Jan. 13, 2017
Chart 40. MCHI iShares ETF, China Equities available international investors, Daily Chart, June 2016 – Jan. 13, 2017
Chart 41. MCHI iShares ETF, China Equities available international investors, Monthly Chart, 2011 – Jan. 13, 2017
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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