Anemic global growth – Building military friction

(Editor's Note: Dr. Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. He can be reached at  recoats@uark.edu.)

By Bobby Coats

One of the problematic characteristics of prolonged acute-anemic global growth is regional and global military friction. Russian warship deployment to Syria near term along with an array of Middle East military activities and Chinese South China Sea aggressive military behavior will likely command growing attention of global market participants. (To see a list of the accompanying charts or to download them, go to the bottom of this article.)

Russian warship deployment to Syria:

“Russian warships filmed off coast of Britain as Royal Navy shadows Syria-bound vessels through English Channel” title of The Telegraph article by Ben Farmer, defense correspondent, Danny Boyle.

“Russian warships have been pictured off the coast of Britain, en route to a suspected bolstering of the bombing campaign on the besieged Syrian city Aleppo.

Royal Navy vessels were closely monitoring the fleet as it passed through the English Channel at 9 a.m. on Friday (Oct. 21). (See accompanying photo.)

Admiral Kuznetsov, an aircraft carrier, and Peter the Great, a Kirov class battlecruiser, were among those filmed off Ramsgate, Kent, in footage posted online.” http://bit.ly/2e6Ky2L

“Russia taunts US with biggest military offensive since the Cold War” title of The Telegraph article by Ben Farmer, defense correspondent, Barney Henderson and Roland Oliphant.

“Russia has begun its biggest surface deployment since the end of the Cold War as it aims to effectively end the war in Syria on the eve of the US election, NATO officials warned last night.

The Kremlin is sending the full might of its Northern Fleet and part of the Baltic Fleet to reinforce a final assault on the city of Aleppo in a fortnight, according to Western intelligence.

The final bombardment is designed to shore up the Assad regime by wiping out rebels – paving the way for a Russian exit from the civil war.” http://bit.ly/2eKIH2M

Saber Rattling Over South China Sea Territory

CNN Politics: “US destroyer sails in South China Sea to make a point”, by Michael Callahan, CNN:

“A US Navy guided-missile destroyer, the USS Decatur, sailed through the South China Sea on Friday in a freedom of navigation operation intended to send a blunt message to China.

White House spokesman Josh Earnest said the point was to let China know that it cannot "unlawfully restrict the navigation rights, freedoms and lawful uses of the sea that the United States and all states are entitled to exercise under international law."

The Pentagon, in a statement, called the USS Decatur's trip "routine" and said it took place "without incident."

The Chinese Defense Ministry released a statement Friday calling the act by the US a serious breach of law and an intentional provocation.” http://bit.ly/2eDARbW

Market Considerations – Near Term

Chart 1 - 2. Soybeans

  • Fundamentals and technicals suggest potential price weakness to potentially $8.50 per bushel
  • Global risks and uncertainties argue a price bottom is in place

Chart 3 – 4. Corn

  • Bottoming process underway
  • A retest of the previous low possible

Chart 5 - 6. Rice

  • Bottoming process underway
  • Caution advised

Chart 7 -8. Cotton

  • Corrective price action underway with possible price weakness to the bottom of the Bollinger Bands
  • Bullish prices likely beyond this corrective price activity 

Chart 9 - 10. Wheat

  • Forming a price bottom
  • Price weakness into the $3.80 per bushel area a possibility

Chart 11 - 12. Copper

  • Copper prices likely need to make a final low before turning bullish over the next 1 to 3 months

Chart 13 - 14. $WTIC

  • A choppy market
  • OPEC, etc. verbal guidance has impact
  • Global oil data questionable
  • Defining a  trading range

Chart 15 - 16. Power Shares US Dollar Index

  • Near term dollar strength generally bearish for U.S. exports and commodity prices in general, likely true in the very short term, but global stimulus, inflationary forces, and event risks likely work against general bearish expectations for commodity prices 

Chart 17 - 18.

  • Consolidating
  • Generally a weakening Australian currency implies weakening demand for their commodity based economy
  • Near term I am neutral but longer term my bias is to the upside

Chart 19 – 20 British Pound Sterling Trust

  • An obvious weak currency
  • BREXIT implied the United Kingdom must retool politically, economically, and socially
  • The currency weakness is a plus for revitalizing their economy

Chart 21 - 22. Canadian Dollar

  • Consolidating and churning sideways, due to present global risks and uncertainties
  • Near term bearish indicator for their commodities 

Chart 23 - 24. EURO Trust

  • European Union economic weakness and political and social  uncertainty problematic for near term EURO strength

Chart 25 – 26. Japanese Yen Trust

  • Dollar shows strength, while the Yen shows weakness, likely positive for Japanese equities

Chart 27 - 28. $UST10Y - 10-Year US Treasury Yield

  • Yield has a possible upside of 2-plus
  • Global anomaly/risk event or compounding events could cause a move to 1- or lower

Chart 29 – 30. SPDR S&P 500 ETF

  • Consolidating, a good week for some corrective price activity, so let price dynamics define price direction.
  • Revisiting the bottom Bollinger Band possible.

Chart 31 - 32. QQQ NASDAQ Power Shares

  • Consolidating
  • Price uncertainty near term, so be respectful until price  direction is further defined

Chart Book Index – Link

Weekly Charts, September 2013 – October 14, 2016

Accompanying Daily Charts

Chart 1. Soybeans, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 2. Soybeans, Daily Chart, May 2016 – Oct. 21, 2016

Chart 3. Corn, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 4. Corn, Daily Chart, May 2016 – Oct. 21, 2016

Chart 5. Rice, Weekly Chart, October 2013 – Oct. 21, 2016

Chart 6. Rice, Daily Chart, February 2016 – Oct. 21, 2016

Chart 7. Cotton, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 8. Cotton, Daily Chart, May 2016 – Oct. 21, 2016

Chart 9. Wheat, Weekly Chart, September 2013 – October 21, 2016

Chart 10. Wheat, Daily Chart, May 2016 – October 21, 2016

Chart 11. Copper, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 12. Copper, Daily Chart, May 2016 – Oct. 21, 2016

Chart 13. $WTIC, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 14. $WTIC, Daily Chart, May 2016 – Oct. 21, 2016

Chart 15. Power Shares US Dollar Index, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 16. Power Shares US Dollar Index, Daily Chart, November 2014 – Oct. 21, 2016

Chart 17. Australian Dollar, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 18. Australian Dollar, Daily Chart, November 2014 – Oct. 21, 2016

Chart 19. British Pound Sterling Trust, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 20. British Pound Sterling Trust, Daily Chart, November 2014 – Oct. 21, 2016

Chart 21. Canadian Dollar, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 22. Canadian Dollar, Daily Chart, November 2014 – Oct. 21, 2016

Chart 23. EURO Trust, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 24. EURO Trust, Weekly Chart, November 2014 – Oct. 21, 2016

Chart 25. Japanese Yen Trust, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 26. Japanese Yen Trust, Daily Chart, November 2014 – Oct. 21, 2016

Chart 27. $UST10Y - 10-Year US Treasury Yield, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 28. $UST10Y - 10-Year US Treasury Yield, Daily Chart, November 2014 – Oct. 21, 2016

Chart 29. SPDR S&P 500 ETF, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 30. SPDR S&P 500 ETF, Daily Chart, November 2014 – Oct. 21, 2016

Chart 31. QQQ NASDAQ Power Shares, Weekly Chart, September 2013 – Oct. 21, 2016

Chart 32. QQQ NASDAQ Power Shares, Daily Chart, May 2016 – Oct. 21, 2016

For more on commodity markets, visit http://agribusiness.uark.edu/