Photo of soybean pods nearing harvest

Green shoots of global reflation emerging

From a “Big Picture Perspective” the week-of Jan. 2, 2017 showed green-shoot signs of building global inflation and thus a continuation of an orderly movement away from dangerous deflationary forces.

From a “Big Picture Perspective” the week-of Jan. 2, 2017 showed green-shoot signs of building global inflation and thus a continuation of an orderly movement away from dangerous deflationary forces. Globally, governments and Central Bank’s stimulative activities of alleviating chronic slow growth and low to negative interest rates are showing positive results.

Near-term market considerations week beginning Jan. 9, 2017

Near-Term summary considerations:

  • 10-Year US Treasury Yield: Acting a little bullish with a lower yield potential, given market structure financial institutions and borrowers winners at these levels.
  • US Dollar Index: Correcting upside move underway, 2017 European Union management/mismanagement key factor in dollar strength or weakness in year ahead.
  • CRB Index: Evolving global macro forces supportive and providing green-shoot inflationary support, presently oil price a key factor in defining index direction, see oil next.
  • $WTIC Light Crude Oil: Fascinating market, but a market which appears in search of higher highs, some corrective price action should be anticipated.
  • Soybeans: Neutral, price weakness now dominates.
  • Corn: Neutral, this market acting more bullish than bearish, patience will be rewarded.
  • Rice: Neutral, price weakness remains problematic defined by global uncertainties.
  • Cotton: Bullish, if prices fall below 68-cents corrective price action likely, re-evaluate price expectations.
  • Wheat: Bullish Acting, this should be an interesting week.
  • SPY SPDR S&P 500 ETF: Trend remains positive.
  • QQQ NASDAQ Power Shares: Closed week at record high, corrective price action needed, but not required.
  • EFA iShares ETF - Global Equities Excluding U.S. and Canada: Range Bound, but appears to be building strength, positive for commodities.
  • EEM iShares ETF, Emerging Market Equities: Range Bound – Potentially Bullish – Positive for commodities in general.
  • MCHI iShares ETF - China Equities Available International Investors: Momentum appears to be building.

Bloomberg Article and Video Clip

Prices Are Rising Across the Globe. That's a Good Thing, Right? By Bloomberg’s Enda Curran, Jeff Black, and Jeanna Smialek, Jan. 4, 2017

From goods leaving the factory floor in China’s industrial towns to gasoline at the pump in Europe and America, prices that stayed low for years are finally going up. So that’s a good sign, right?

After a period of central bankers fretting about deflation and resorting to unconventional techniques like negative rates to respond, the easy answer is “yes.” But whether faster price gains mean that the world is finally healing from the Great Recession may be revealed only by what happens next.

In the rosy case, the global economy is now being offered a tonic by resurgent pricing for key commodities such as oil and iron ore, and a buoyant U.S. entering the presidency of Donald Trump will help drive demand, wages and investment everywhere. In another scenario, a litany of political risks from Trump himself to the potential bungling of Britain’s exit from the European Union await the unwary, and reflation could end up crimping consumer spending while failing to propel wages and investment.

“Some of the financial market optimism is justified but political and policy risks remain, and the rise in global inflation is likely to prove short-lived,” said Janet Henry, global chief economist at HSBC Bank Plc in London.

 

Continue reading at following link

https://www.bloomberg.com/news/articles/2017-01-05/reflationistas-beware-as-global-price-revival-belies-risks-ahead

 

 

Market-by-Market: Near Term Market Considerations Week Beginning January 9, 2017

 

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

Primary Consideration:

  • Neutral Near-Term: the 10-Year Treasury Yield acting a little bullish with lower yield potential, given market structure financial institutions and borrowers winners at these levels, next 2 weeks likely critical to directional movement
  • Washington Leadership expected to be friendly to business, which favors investing in equities, the dollar and commodities over bonds – entry and exit always the trick
  • 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.

Charts 4 - 6. Power Shares US Dollar Index

Primary Considerations:

  • Neutral Near Term - Correcting upside move underway
  • 2017 European Union management/mismanagement key factor in dollar strength or weakness in the year ahead
  • 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:

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, 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
  • Likely primary range $40 to $60 with possible high in $72 area in 2017
  • A challenging market for a number of economic and geopolitical reasons
  • Washington Leadership likely bullish U.S. production
  • OPEC and other oil producers, or events may define 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

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

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

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, this should be an interesting week

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

Charts 33 - 35. EFA iShares ETF, Global Equities Excluding U.S. & Canada

Primary Consideration:

  • Range Bound, but appears to be building strength
  • The week of Jan. 2, 2017 was not a bad week, so we watch the price action and see if we can duplicate the effort the week of January 9, 2017

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, 2012 – Jan. 6, 2016
  • Chart 2. $UST10Y - 10-Year US Treasury Yield, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 3. $UST10Y - 10-Year US Treasury Yield, Monthly Chart, 1997 – Jan. 6, 2016
  • Chart 4. Power Shares US Dollar Index, Weekly Chart, Dec. 2013 – Jan. 6, 2016
  • Chart 5. Power Shares US Dollar Index, Daily Chart, July 2016 – Jan. 6, 2016
  • Chart 6. Power Shares US Dollar Index, Monthly Chart, July 2016 – Jan. 6, 2016
  • Chart 7. $CRB Reuters/Jefferies CRB Index, Weekly Chart, September 2013 – Jan. 6, 2016
  • Chart 8. $CRB Reuters/Jefferies CRB Index, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 9. $CRB Reuters/Jefferies CRB Index, Monthly Chart, 2007 – Jan. 6, 2016
  • Chart 10. $WTIC, Weekly Chart, Dec. 2013 – Jan. 6, 2016
  • Chart 11. $WTIC, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 12. $WTIC, Monthly Chart, July 2005 – Jan. 6, 2016
  • Chart 13. Soybeans, Weekly Chart, September 2013 – Jan. 6, 2016
  • Chart 14. Soybeans, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 15. Soybeans, Monthly Chart, 15 Year Chart – Jan. 6, 2016
  • Chart 16. Corn, Weekly Chart, September 2013 – Jan. 6, 2016
  • Chart 17. Corn, Daily Chart, May 2016 – Jan. 6 2016
  • Chart 18. Corn, Monthly Chart, 2005 – Jan. 6, 2016
  • Chart 19. Rough Rice Jan '17 (ZRF17) CBOT, Quarterly, Continuation Chart, 1987 – Jan. 6, 2016
  • Chart 20. Rough Rice Jan '17 (ZRF17) CBOT, Daily Continuation Chart, August 2016 – Jan. 6, 2016
  • Chart 21. Cotton, Weekly Chart, September 2013 – Jan. 6, 2016
  • Chart 22. Cotton, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 23. Cotton, Monthly Chart, 2007 – Dec. 23, 2016
  • Chart 24. Wheat, Weekly Chart, September 2013 – Jan. 6, 2016
  • Chart 25. Wheat, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 26. Wheat, Monthly Chart, July 2016 – Jan. 6, 2016
  • Chart 27. SPDR S&P 500 ETF, Weekly Chart, September 2013 – Jan. 6, 2016
  • Chart 28. SPDR S&P 500 ETF, Daily Chart, May 2016 – Jan. 6, 2016
  • Chart 29. SPDR S&P 500 ETF, Monthly Chart, May 2016 – Jan. 6, 2016
  • Chart 30. QQQ NASDAQ Power Shares, Weekly Chart, September 2013 – Nov 18, 2016
  • Chart 31. QQQ NASDAQ Power Shares, Daily Chart, June 2016 – Jan. 6, 2016
  • Chart 32. QQQ NASDAQ Power Shares, Monthly Chart, 2007 – Jan. 6, 2016
  • Chart 33. EFA iShares ETF, Global Equities Excluding U.S. & Canada, Weekly Chart, May 2014 – Jan. 6, 2016
  • Chart 34. EFA iShares ETF, Global Excluding U.S. & Canada, Daily Chart, 2016 – Jan. 6, 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 – Jan. 6, 2016
  • Chart 37. EEM iShares ETF, Emerging Market Equities, Daily Chart, 2016 – Jan. 6, 2016
  • Chart 38. EEM iShares ETF, Emerging Market Equities, Monthly Chart, 2007 – Jan. 6, 2016
  • Chart 39. MCHI iShares ETF, China Equities available international investors, Weekly Chart, 2014 – Jan. 6, 2016
  • Chart 40. MCHI iShares ETF, China Equities available international investors, Daily Chart, 2016 – Jan. 6, 2016
  • Chart 41. MCHI iShares ETF, China Equities available international investors, Monthly Chart, 2011 – Jan. 6, 2016

 

  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]

 

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TAGS: Corn Cotton Rice
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