Photo of cotton field with house in background in northeast Arkansas
Arkansas growers are expected to plant more fields in cotton in 2017.

Global economic upturn underway – Positive for global equity and commodity markets

An analysis of commodity price charts indicates cotton could rise to the 84-cent area, but a close below 68 cents could mean corrective action is underway.

Article Outline

  • President Trump – Market Catalyst
  • Near Term Market Considerations Week Beginning February 6, 2017
  • Markets Continue Absorbing Global Government and Central Bank Leadership
  • S. Federal Reserve Bank Intervention
  • Rising Interest Rate Environment
  • Federal Reserve Issues FOMC Statement
  • Global Economic Upturn Underway, Near Term Positive for Global Equity and Commodity Market
  • Commodity ETFs One Month Percent Change
  • Select U.S. Market ETFs One Month Percent Change
  • Select U.S. Market ETFs One Month Percent Change
  • Market-by-Market: Near Term Market Considerations Week Beginning February 6, 2017. To see the charts, visit http://www.deltafarmpress.com/marketing/market-price-considerations-week-feb-6-2017.

President Trump – Market Catalyst

Near term President Donald Trump is fulfilling his reflation leadership role as a catalyst for building economic and market activity along with Congress and the Central Bank. 

  • With each passing week the overall “Market Euphoria” will become increasingly focused on fundamental, social and political realities.
  • Understanding the larger macro market moving realities we’ll discuss as events unfold.  
  • Weekly Market Considerations Chart Show: The reason for adding the weekly market considerations chart show is to allow readers to easily visualize and follow an array of domestic and global market activity.

NearTerm Market Considerations Week Beginning February 6, 2017

Near Term Summary Considerations:

  • 10-Year US Treasury Yield: Neutral, potentially a little bullish or a lower yield
  • US Dollar Index: Near term dollar weakness likely or simply sideways consolidation for a period
  • CRB Index: Global macro forces supportive and slowly building inflationary support emerging
  • $WTIC Light Crude Oil: Geo-economic and geopolitical issues seem to dominate price action. Technically this market appears in search of higher highs, fundamentals suggest some corrective price action should be anticipated
  • Soybeans: Soybeans prices either rebound early this week or additional price weakness will have to be defined.
  • Corn: Consolidating, market acts more bullish than bearish, but needs to close above $3.69
  • 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 prices likely into the 84-cent area. Near term if prices fall below 68-cents, then likely corrective price activity underway
  • Wheat: Consolidating, needs to close and hold above $4.40 to maintain any upward momentum
  • SPY SPDR S&P 500 ETF: Trend remains positive, prices need to correct or consolidate some of their gains
  • QQQ NASDAQ Power Shares: Another good week, 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 even though momentum slowed the week of January 30, 2017, important week ahead
  • MCHI iShares ETF - China Equities Available International Investors: Potentially bullish, political friction should not be overlooked, price action very important at this point

Markets Continue Absorbing Global Government and Central Bank Leadership

For the most part domestic and global equity and commodity market participants remain focused on positives associated with U.S. Presidential, Congressional, and Central Bank and global counterpart intervention activities of ongoing and anticipated building aggressive stimulative reflation activities through Fiscal Policy and transitioning away from Central Bank monetary accommodation to managing economic activity in a rising interest rate environment.

  1. S. Federal Reserve Bank Intervention: The big potentially market moving story the week of Jan. 30 did not surround presidential and congressional stimulative actions, since most market participants believe at least near term they have a reasonable handle on those expectations.

But rather market participant anxiety focused on the U.S. Federal Reserve guidance Feb. 1 following their Federal Open Market Committee (FOMC) Meeting.

  • The Fed’s FOMC statement actually remained near term conservative or accommodative even though their verbal guidance was hawkish, implying at least for the next one to two years, highly advising all to plan to manage their economic activity in an elevated interest rate environment.

Rising Interest Rate Environment: A rising interest rate environment would be for example the 10-year Treasury yield was 1.37 in July 2016, and rose to 2.60 in December 2016, presently on Feb. 3, closed at 2.49.

The bond market has been in a 35-year bull market or falling yields. Some suggest the bond bull market will be over when the 10-year yield exceeds and stays above 2.60, others say a yield of 3.00 and others even suggest higher.

  • Reality is we could move sideways for a number of years in a range probably not higher than 3 to 4 for the next 1 to 2 years and with the next recession the possibility of retesting the previous low or even lower, will be defined by domestic and global fiscal and monetary policy remaining a possibility.

The Fed in their FOMC statement said. “In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.”

If the Fed had chosen to raise the rate then most likely the dollar and interest rates would have found lift, which likely would have been negative for many global currencies and commodities in general given current global economic conditions.

The Fed presently appears to be leaning toward a federal funds rate increase in June with plans for only 2 rate hikes this year. That said we could still see some additional strength in the 10-year Treasury if the Fed decides to start reducing their balance sheet.

Global Economic Upturn Underway

Near Term Positive for Global Equity and Commodity Markets

Presently, the ongoing and accelerating “Orchestrated Global Economic-Upturn” is underway and achieving desired results, which can be seen by the following U.S. and Global equity and commodity markets.

The following is a select list of United States, International and Commodity ETFs and their respective market activity over the past month, which in turn reflects domestic and global building or declining momentum.

Commodity ETFs One Month Percent Change

Symbol

Name

Monthly

Change

LD

IM Lead Bloomberg

12.89%

LIT

IM Lithium (GX)

8.59%

DBB

IM Base Metals Fund (PS)

8.18%

SLV

PM Silver Trust (iShares)

7.32%

JJU

IM Aluminum Bloomberg

7.08%

PPLT

PM Physical Platinum Shares

6.89%

BAL

SO Cotton Bloomberg

  1. 78%

JO

SO Coffee Bloomberg

6.32%

JJC

IM Copper Bloomberg

5.68%

DBP

PM Precious Metals Fund

5.36%

PALL

PM Physical Palladium Shares

5.17%

GLD

PM Gold Trust (SPDR)

5.12%

WEAT

GR Wheat Fund (TC)

  1. 96%

JJG

GR Grains Bloomberg

3.87%

JJN

IM Nickel Bloomberg

3.81%

SGG

SO Sugar Bloomberg

3.68%

DBA

AG Agriculture Fund (PS)

3.06%

SOYB

GR Soybeans Fund (TC)

  1. 01%

COW

ME Livestock Bloomberg

  1. 90%

CORN

GR Corn Fund (TC)

  1. 59%

DJP

Bloomberg Commodity Bloomberg Index

2.23%

GSP

GSCI Commodity Total Return

1.94%

DBC

Commodity Tracking Fund

1.66%

BNO

EN Oil Brent Fund

1.10%

USO

EN Oil Fund 03 Month Fund

0.87%

USL

EN Oil Fund 12 Month Fund

-0.25%

DBE

EN Energy Fund

-1.33%

NIB

SO Cocoa Bloomberg

-5.79%

UGA

EN Gasoline Fund

-6.07%

UNG

EN Natural Gas Fund (USCF)

-8.03%

GAZ

EN Natural Gas Bloomberg

-16.95%

 

 

 

 

 

 

Select U.S. Market ETFs One Month Percent Change

Symbol

Name

Monthly

Change

QQEW

Nasdaq 100 Equal Weight

5.35%

QQQ

Nasdaq 100 Trust

5.14%

IWR

Russell MidCap

2.49%

MDY

S&P 400 MidCap

2.25%

IWB

Russell 1000 LargeCap

2.01%

ITOT

S&P Total US Stock Market

1.99%

IWV

Russell 3000 Total Market

1.96%

RSP

S&P 500 Equal Weight

1.87%

SPY

S&P 500

1.82%

OEF

S&P 100 LargeCap

1.46%

DIA

Dow Industrials

  1. 09%

IWM

Russell 2000 SmallCap

1.00%

IJR

S&P 600 SmallCap

-0.15%

IWC

Russell MicroCap

-1.15%

International ETFs One Month Percent Change

Symbol

Name

Monthly

Change

BRF

LA Brazil Small Cap

15.39%

SCIF

Asia India Small Cap Fund

13.37%

FM

EM Frontier Markets

12.36%

TUR

EA Turkey

11.97%

EPOL

EU Poland Investable

10.85%

CQQQ

Asia China Sector Technology

10.01%

ENZL

Asia New Zealand Investable

9.48%

EWZ

LA Brazil

9.11%

EWY

Asia South Korea

9.03%

EWS

Asia Singapore

8.89%

KWEB

Asia China Sector Internet

8.67%

ILF

LA Latin America 40

8.47%

FRN

EM Frontier Markets 100 MSCI

8.16%

EPI

Asia India Earnings Fund

8.10%

PIN

Asia India

8.02%

ECH

LA Chile

8.00%

GULF

ME Middle East Dividend

7.92%

INDA

Asia India MSCI Index

7.87%

AAXJ

Asia Ex-Japan

7.36%

EDIV

DV Emerging Dividend

7.32%

EPU

LA Peru

7.10%

EWD

EU Sweden

6.88%

EDD

Emerging Markets Domestic Debt Fund

6.71%

IEMG

EM Emerging Markets Core

6.69%

MCHI

Asia China Broad MSCI Index

6.61%

EWT

Asia Taiwan

6.56%

EEM

EM Emerging Markets

6.55%

CHIQ

Asia China Sector Consumer

6.49%

EPHE

Asia Philippines Investable

6.17%

HAO

Asia China Broad Small Cap

6.12%

EWH

Asia Hong Kong

6.11%

NORW

EU Norway 30

6.10%

VWO

EM Emerging Markets

5.86%

THD

Asia Thailand Investable

5.60%

EWO

EU Austria

5.48%

TAO

Asia China Sector Real Estate

5.48%

EWW

NA Mexico

5.48%

GXG

LA Columbia 20

5.07%

EZA

AF South Africa

5.01%

EWM

Asia Malaysia

4.88%

EWA

Asia Australia

4.86%

SCZ

Europe-Australasia-Far East Small Cap

4.53%

IXUS

Global Core MSCI Total

4.47%

EMLC

Emerging Markets Local Currency Bond Fund

4.41%

EWG

EU Germany

4.34%

VEU

All World Ex-US

4.29%

FXI

Asia China Broad Large Cap 50

4.21%

EWL

EU Switzerland

4.16%

GAF

AF Emerging Middle East Africa

4.09%

EWN

EU Netherlands

4.01%

ASHR

Asia China Broad CSI 300 A-Shares

3.73%

EWC

NA Canada

3.69%

EWJ

Asia Japan

3.63%

IEFA

Europe-Australasia-Far East Core

3.63%

EFA

Europe-Australasia-Far East Index

3.53%

DWX

DV International Dividend

3.51%

EWP

EU Spain

3.43%

EUFN

EU Europe Financial Sector

3.26%

IDV

DV International Select Dividend

3.15%

VNM

Asia Vietnam

3.09%

ALD

Asia Local Debt

3.08%

HEEM

Currency Hedged Emerging Mkts

3.07%

EZU

EU All Eurozone

2.88%

PCY

Emerging Markets Sovereign Debt Fund

2.57%

PCY

Emerging Markets Sovereign Debt Fund

2.57%

EIS

ME Israel

2.54%

EIDO

Asia Indonesia

2.51%

EWK

EU Belgium

2.51%

HYEM

Emerging Markets High Yield Bond Fund

2.50%

CHIX

Asia China Sector Financials

2.39%

EMB

Emerging Markets USD Bond Fund

2.29%

SDIV

DV Global Super Dividend

2.29%

EWQ

EU France

2.27%

EWU

EU United Kingdom

2.24%

HEWG

Currency Hedged Germany

0.88%

RSX

EA Russia

0.83%

HEFA

Currency Hedged EAFE

0.15%

ERUS

EA Russia Capped

0.03%

DXJ

Currency Hedged Japan

0.00%

DBEF

Currency Hedged EAFE

-0.04%

HEDJ

Currency Hedged Europe

-0.05%

HEZU

Currency Hedged EMU

-0.44%

HEWJ

Currency Hedged Japan

-0.64%

BNDX

Total International Bond Fund

-0.69%

EWI

EU Italy

-0.78%

EGPT

AF Egypt

-1.08%

NGE

AF Nigeria

-1.75%

GREK

EU Greece

-1.99%

 

Market-by-Market: Near Term Market Considerations Week Beginning February 6, 2017

Charts 1 - 3. $UST10Y - 10-Year US Treasury Yield

Primary Consideration:

  • Neutral: the 10-Year Treasury Yield potentially bullish with a lower yield potential
  • This is a market that likely builds a trading range for the next one to two years with the Federal Reserve defining potential upside with a potential top at 3 to 4
  • We simply need to allow chart activity to provide guidance
  • Present market structure suggests 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 above 2.6, others at 3.0; Actually, global fiscal and policy market intervention may make picking these points premature
  • This is a market that could simply move sideways for a few years and even revisit the previous low or make a new low

Charts 4 - 6. Power Shares US Dollar Index

Primary Considerations:

  • Neutral - The following determines sideways consolidation for a period or a resumption of the Dollar’s 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, including President Trump’s currency and trade policy objectives

Chart 7. EURO 

  • Potentially bullish near term

Chart 8. Australian Dollar

  • Near term building momentum

Chart 9. Canadian Dollar

  • Potential near term strength

Chart 10. Japanese Yen

  • Increasingly likely near term strength

Chart 11. British Pound

  • Possible corrective price action before heading lower

Chart 12. Dow Jones

  • Trend remains up

Chart 13. Dow Transports

  • Trend remains up

Chart 14. S&P 500 Large

  • Trend remains up

Chart 15. NASDAQ Composite

  • Trend remains up

Chart 16. World Equity less U.S. & Canada

  • Positive momentum appears to be building

Chart 17. Emerging Markets

  • Momentum slowed, important week ahead

Chart 18. Australia

  • Positive momentum appears to be building

Chart 19. Brazil

  • Momentum appears to be slowing

Chart 20. Canada

  • Positive momentum appears to be building

Chart 21. China

  • This China equity remains neutral

Chart 22. Mexico

  • Possible bottom being formed

Chart 23. Japan

  • Positive momentum appears to be building

Chart 24. Russia

  • Price direction likely dependent on oil price firmness

Chart 25. India

  • India is presently dealing with a number of internal issues

Charts 26 - 28. CRB Index

Primary consideration:

  • The CRB Commodity Index appears to be building a base to move higher, which near term would be a primary function of oil price leadership and/or broad commodity support, reasonably stable to weaker dollar, and belief and confidence in the near term industry and global fiscal/monetary policy leadership.

Charts 29 - 31. $WTIC Light Crude Oil

Primary Consideration:

  • A challenging market being influenced by Geopolitical and Geo-economic issues
  • A market which appears in search of higher highs, corrective price action should be anticipated

2017 – Likely primary range $40 to $60 with possible high in $72 area

  • Washington Leadership likely bullish U.S. energy production
  • OPEC and other oil producers have major role in defining 2017 price structure
  • Global uncertainties supportive of prices

Charts 32 - 34. Soybeans

Primary Consideration:

  • Soybean prices either rebound early this week or additional price weakness will have to be defined
  • A near term price rebound, would make one revisit 2016 price action in March, April and May.
  • Remove reflationary activities and global uncertainties, given fundamentals then price weakness would likely be highly problematic
  • 2017 – Pricing opportunities likely emerge as the year progresses
  • Additional Thought:
  • Market participants appear to be building a risk appetite. Being short means at least having close mental stops

Charts 35 – 37. Corn

Primary consideration:

  • Consolidating, but this market continues to act more bullish than bearish, closing and holding above $3.69 likely implies a move into the $4.15-plus
  • 2017 – Pricing opportunities emerge as the year progresses in corn, soybeans, and wheat

Charts 38 - 39. 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 40 - 42. 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 43 - 45. Wheat

Primary consideration:

Consolidating, needs to close and hold above $4.40 to maintain any upward momentum

Charts Book Index – Link

  • Chart 1. $UST10Y - 10-Year US Treasury Yield, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 2. $UST10Y - 10-Year US Treasury Yield, Daily Chart, May 2016 – Feb. 3, 2017
  • Chart 3. $UST10Y - 10-Year US Treasury Yield, Daily Chart, 2007 – Feb. 3, 2017
  • Chart 4. Power Shares US Dollar Index, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 5. Power Shares US Dollar Index, Daily Chart, July 2016 – Feb. 3, 2017
  • Chart 6. Power Shares US Dollar Index, Monthly Chart, August 2007 – Feb. 3, 2017
  • Chart 7. EURO Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 8. Australian Dollar Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 9. Canadian Dollar Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 10. Japanese Yen Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 11. British Pound Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 12. Dow Jones, Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 13. Dow Transports Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 14. S&P 500 Large Caps Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 15. Nasdaq Composite, Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 16. World less U.S. & Canada Monthly Chart, 2001 – Feb. 3, 2017
  • Chart 17. Emerging Markets Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 18. Australia Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 19. Brazil Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 20. Canada Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 21. China Monthly Chart, 2004 – Feb. 3, 2017
  • Chart 22. Mexico Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 23. Japan Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 24. Russia Monthly Chart, 2007 – Feb. 3, 2017
  • Chart 25. India Monthly Chart, 2007 – Feb. 3, 2017
  • Chart 26. $CRB Reuters/Jefferies CRB Index, Weekly Chart, November 2013 – Feb. 3, 2017
  • Chart 27. $CRB Reuters/Jefferies CRB Index, Daily Chart, July 2016 – Feb. 3, 2017
  • Chart 28. $CRB Reuters/Jefferies CRB Index, Monthly Chart, 2007 – Feb. 3, 2017
  • Chart 29. $WTIC, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 30. $WTIC, Daily Chart, July 2016 – Feb. 3, 2017
  • Chart 31. $WTIC, Monthly Chart, 2007 – Feb. 3, 2017
  • Chart 32. Soybeans, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 33. Soybeans, Daily Chart, July 2016 – Feb. 3, 2017
  • Chart 34. Soybeans, Monthly Chart, 2004 – Feb. 3, 2017
  • Chart 35. Corn, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 36. Corn, Daily Chart, July 2016 –Feb. 3, 2017
  • Chart 37. Corn, Monthly Chart, 2007 – Feb. 3, 2017
  • Chart 38. Rough Rice Mar '17 (ZRF17) CBOT, Quarterly, Continuation Chart, 1987 – Feb. 3, 2017
  • Chart 39. Rough Rice Mar '17 (ZRF17) CBOT, Daily Chart, Feb. 2016 – Feb. 3, 2017
  • Chart 40. Cotton, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 41. Cotton, Daily Chart, July 2016 – Feb. 3, 2017
  • Chart 42. Cotton, Monthly Chart, 1997 – Feb. 3, 2017
  • Chart 43. Wheat, Weekly Chart, 2014 – Feb. 3, 2017
  • Chart 44. Wheat, Daily Chart, July 2016 – Feb. 3, 2017
  • Chart 45. Wheat, Monthly Chart, July 2016 – Feb. 3, 2017

 

  1. 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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