Corn pickers harvest grain from Mid-South field

Mr. Trump goes To Washington: Market price considerations for the week of Jan. 16.

Beginning of new administration, Congress could lead to interesting commodity market developments.

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
  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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