We have been talking about the fact that global growth gives every appearance of being synchronized; with this synchronization comes the increasing likelihood of sustainable growth for a period of one to three years. This may or may not be optimistic, but we will take market activity in blocks of three to six months.  

Sustained growth for a period of one to three years is critical, because the alternative would be U.S. and global economies sinking into a recession with deflation dominating global market direction across the board from currencies, to bonds and equities to commodities. This would usher in the return of chronic slow global growth and further magnify the ongoing problems of low to negative interest rates, populists’ movements, political uncertainty and military friction.

International Equity Performance:

The week of October 23, 2017, was an interestingly strong week for an array of domestic and global markets. For the week India was up 2.4 percent, NASDAQ was up 1.7 percent, Japan 1.6 percent, South Korea 1.3 percent, Singapore 1.3 percent, China 0.8 percent, France 0.5 percent, Dow Jones Industrial Average 0.5 percent, Germany 0.3 percent, Taiwan 0.3 percent, S&P 500 0.2 percent. Download the accompanying slide show and view slides 12-17 to see the one week, monthly, three month, six month, and one year percent change for a select group of international market ETFs. These tables provide insight into the building global growth.

Commodity Performance:

As we have stated before rice, cotton, soybeans, corn and wheat in the commodity complex have lagged behind the price advances in much of the hard asset group.

The week of October 23, 2017 was also an interestingly strong week for many commodities and a supportive week for others, see slides 6-11 in the accompanying slide show. For the week the following commodity ETFs performed as follows: Sugar Bloomberg Index was up 4.8 percent Gasoline Fund was up 4.3 percent, Brent Oil fund 4.1 percent, Energy Fund 3.2 percent, GSCI Commodity Total Return 2.7 percent, Livestock Bloomberg Sub-index 2.5 percent, Cotton Bloomberg Sub-index 1.8 percent, Aluminum Bloomberg Sub-index 1.8 percent, Agriculture Fund 1.5 percent. Download the accompanying slide show and view slides 6-11 to see the one week, monthly, three month, six month, and one year percent change.

What to expect from the markets this week, October 30, 2017

Market “Near Term” Snap Shot

Rice: Price action appears to be corrective with likely another leg to the upside (Charts 38 and 39)

·       Cotton: Cotton needs to confirm a bottom is in place this week (Charts 40 and 42)

·       Soybeans: A complex market being affected by global macro forces that is likely building a base to move higher (Charts 32 and 34)

·       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 (Charts 35 and 37)

·       Wheat: Wheat appears to have additional price weakness into the 3.90 area (Charts 43 and 45)  

·       10-year Treasury Yield: Remains in a Sideways Trading Range with a near term slightly bearish bias or higher yield (Charts 1 and 3)

·       U.S. Dollar: Corrective action continues to the upside, but once complete the door is open for a decline to 87 or lower (Charts 4 and 6)

·       Oil $WTIC: Momentum regained and likely sustained this week. The $45 to $50 trading range likely has broadened to $45 to $55-plus (Charts 29 and 31)

·       $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 (Charts 26 and 28) 

·       S&P 500: Primary trend remains up. Consolidation or correction desirable not required as the retail investor keeps entering the market (Chart 14)

·       Global Equities Excluding U.S. and Canada: Primary trend remains up, but a cautionary time period, interestingly trying to regain momentum (Chart 16)

·       Feeder Cattle: In search of a top   

In addition to the following “Expanded near Term Market Outlook Considerations for Week Beginning October 30, 2017”

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

This Week’s Select Summary Considerations:

•        10-Year US Treasury Yield:

•        Remains in a Sideways-Trading-Range with a near term slight bearish bias or higher yield.

•        Near term higher yields have been in part a function of U.S. and Global market intervention activities designed to extend domestic and global growth and 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:

•        Corrective activity continues, but once complete the door is open for a decline to 87.

•        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:

•        Momentum regained and likely sustained 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:

•        A complex market that is likely building a base before moving higher.

•        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: Until this market breaks out, remain mindful a retest of the $9.00 area or potentially lower remains a possibility.

•        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 confirm a bottom is in place this week.

•        Wheat:

•        Wheat appears to have additional price weakness into the 3.90 area.

•        SPY SPDR S&P 500 ETF:

•        Primary trend remains up.

•        Consolidation or correction desirable not required. 

•        Allow price action to provide guidance.

•        $COMPQ Nasdaq Composite:

•        Regaining momentum on the backs of Amazon, Alphabet, Intel, Microsoft, etc.

•        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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