Home Commodities News Bullish base building – equities and commodities

Bullish base building – equities and commodities

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A methodical multiple-month equity and commodity base building process is underway that will likely carry many U.S. and global equity and commodity markets higher upon completion of the ongoing base building process. Each market has its own unique chart structure, so follow the price action closely. Cotton, soybeans, corn and wheat appear to have the potential to be significant benefactors of the ongoing realignment of global currency, bond, equity, and commodity markets. Global growth remains stimulus driven as the World’s Governments and Central Banks remain totally dedicated to achieving growth, inflation, interest rate, employment, etc. goals in country after country around the world.   

Quick Look

  • Commodity Index, $CRB – Bullish Consolidation, building a base to move higher
  • Oil, $WTIC – Remains bullish.
  • Cotton, – Consolidating gains before moving higher.  
  • Dow, S&P 500, and NASDAQ Composite – Sideways consolidation before moving higher.
  • Foreign Stock Markets – Sideways consolidation or corrective period for many markets before moving higher.
  • Soybeans – Sideways consolidation, support needs to hold at $9.80 to remain near term bullish.
  • Corn – Bullish, support needs to hold at $3.91 to remain near term bullish.
  • Wheat – Bullish, support needs to hold at $4.90 to remain near term bullish.
  • Rice – New crop price a function of demand and planting expectations.
  • U.S. Dollar – Bullish on European political, emerging market and other global uncertainties.
  • 10-Year U.S. Treasury Yield – Upside momentum in play.

 Week beginning May 21, 2018

10-Year US Treasury Yield: Slow sideways to up bias. 10-Year Treasury Yield closed the week of May 14, 2018, above 3 percent at 3.06. For a multi-month period this market likely trades in an interest rate range of 3.3 on the upside and the downside to 2.66.

Market participants are anticipating a Fed Fund Rate increase of .25 percent at the next Federal Reserve Open Market Committee (FOMC) meeting June 12-13, 2018, and another likely increase at their September 25-26, 2018, meeting. (Charts A1-A4)

U.S. Dollar Index: Bullish on European, emerging market and global uncertainties. With the dollar index presently at 93.5 (Charts A5-A8) and off its low of 88.15, the index is in a slow determined corrective grind to the upside.  The dollar has entered a possible one to two or more months of more strength than weakness with an upside potential target of 96 to 98 before returning to dominate downside trend.This is an extremely challenging market since the U.S. Dollar strength has negative economic consequences to frontier, emerging, and developing economies, so we will closely monitor this market and adjust our expectations accordingly.

S&P 500: Sideways consolidation before moving higher. Prices need to move back above 2720 and hold to regain momentum needed to retest previous highs of 2873. Prices falling through 2560 would be near term bearish, but market cleansing.The trend in this market remains up, but one should anticipate an additional one to two or more months of potentially stronger corrective activity, so exercise caution and at least consider the outside potential of a 20 percent correction from the high. Just let price action provide guidance. Note the collection of attached Equity Charts A14 to A28.

NASDAQ Composite Index: Just let price action provide guidance and be an active risk manager. The trend in this market is up, but be respectful of the dynamics of this market. This high visibility market where speculative interest, high frequency traders, passive investors, etc., dominate price action absorbs its energy and leadership from the likes of Facebook, Apple, Google, Amazon, Netflix, Microsoft, etc. These high-tech giants will continue experiencing on-again and off-again headwinds on several different fronts extending beyond consumer privacy rights.

$WTIC Light Crude Oil: This is a market that appears to be in breakout mode. My present working thesis, this is also a market in search of a top, possibly in the $85 area, before starting a grind lower. Alternative thesis: This is a market in search of a top, possibly in the $85 area before becoming range bound in a sideways trading range of $55 to $75 for possibly a multiyear period. A continuation of the oil breakout will be more positive than negative for the commodity sector as speculative and value investors scan the commodity complex for speculative and value investments. An interesting array of factors from fundamentals, to global policy drivers, to social, economic, political, and military uncertainties keep this market at elevated levels and they do not appear to be losing their influence anytime soon.

CRB Commodity Index: Building bullish base as ongoing global stimulus driven growth coupled with geopolitical concerns appear to be near term supportive of the commodity sector. With ongoing global equities realigning with global currency, bond and commodity markets, near term the index needs to push through resistance at 205 (currently at 203.7). On the downside, the CRB Index needs to hold near term support at 195 and longer term support at 180, otherwise major across the board commodity weakness would likely emerge.

Ag Sector and Trade: May 18, 2018 – Trump’s bonfire of the treaties sweeps towards the WTO

GENEVA (Reuters, Tom Miles) – President Donald Trump has the World Trade Organization in a chokehold, and the United States has made clear what he wants: no more judicial rulings that interpret WTO rules to Washington’s disadvantage. Trump has effectively engineered a crisis in the WTO’s system of settling global disputes by vetoing all appointments of judges to its appeals chamber.

True to the president’s style, his ambassador to the Geneva-fbased body, Dennis Shea, is unapologetic about shrinking the supreme court of world trade to a size where it will struggle to function. “The United States is not content to be complacent about this institution,” Shea told fellow WTO ambassadors this month. https://reut.rs/2wUbOh9

Rice, Grain and Cotton Charts B1-B28 in Chart Book

  • Soybeans: The week of May 21, 2018 soybean prices first need to hold $9.80 per bushel to remain in a corrective period with the near-term expectation of grinding out higher prices. Otherwise, this market could be facing some serious price weakness to $9.47 and then $9.01. Reality is, this market has spent almost 4 months moving sideways without a bullish or bearish commitment, so we sit back and watch the price action.   
  • Corn: If corn prices can hold $3.91per bushel, price has the potential to move to its June 2016 high of $4.39 per bushel and a possible secondary target of $4.83 per bushel. Corn ending the week-of May 21, 2018, below $3.91 per bushel opens the door to a possible decline to $3.64 per bushel.
  • Wheat: Wheat needs to hold above $4.90 the week of May 21, 201,8 and build on the previous week’s gained price momentum.       
  • Long Grain Rice: Planting for the present global long grain rice market demand is very important to the economic health of the U.S. long grain rice sector in 2018; therefore, long grain planted acreage needs to remain close to the acreage figure released in the March 29, 2018, USDA Planting Intentions Report.  
  • Cotton: Cotton prices remain sideways to up with the objective of moving to and possibly through the 89-cent area.   
  • Article worth reading:

Columbia Daily Tribune – Biofuel policy adds to agricultural market uncertainty, Pat Westhoff, Director of the Food and Agricultural Policy Research Institute at the University of Missouri and a Professor of Agricultural and Applied Economics.

“When a new farm bill is up for debate, it is usually the top source of policy-related uncertainty for farmers and agricultural markets. This year, it might not even make the top two.”

“Ongoing trade negotiations and disputes have garnered a lot of attention in the farm press. New tariffs on U.S. farm products, for example, could reduce U.S. agricultural exports and commodity prices. Decisions made by trade negotiators may have multi-billion dollar effects on farm income. Biofuel policy decisions also have the potential to have large impacts on commodity markets and farm income.” Continue reading at the following link: https://bit.ly/2s2LDiv

Timely Farm Bill Video

Farm Bill Video: Dr. Keith Coble, Farm Bill Update “Putting the House Committee Farm Bill in Context” video produced May 17, 2018.

Dr. Keith Coble is a Giles Distinguished Professor and Head of the Agricultural Economics Department at Mississippi State University and former Chief Economist for the U.S. Senate Agriculture, Nutrition, and Forestry Committee and his research focus is on risk management, agricultural policy, and insurance.

Upcoming Rice Outlook Webinar:

UA Rice Webinar: USDA’s Nathan Childs on The 2018/19 U.S. and Global Rice Market Outlook—Production, Trade, Use, Stocks, and Prices

Webinar: May 24, 2018, 3:00 PM in Central Time (US and Canada). USDA’s Nathan Childs, Agricultural Economist, USDA’s Economic Research Service: The 2018/19 U.S. and Global Rice Market Outlook—Production, Trade, Use, Stocks, and Prices

Description: Nathan Childs will present the first official USDA global and U.S. rice market forecasts for 2018/19, including calendar year 2019 world rice trade.  For the U.S., production, use, trade, stocks and price forecasts will be presented by class and for all rice.  All rice country-specific and global supply and use forecasts will be presented as well, with an emphasis on major trading countries.  The first forecasts for global trade for calendar 2019 will be presented.  Factors driving these forecasts will be explained. 

Bio: Nathan Childs is an agricultural economist with USDA’s Economic Research Service. His current activities include managing ERS’ contribution to the rice situation and outlook program and supporting the Department’s annual Baseline forecasting activities.  Nathan joined ERS in 1987. During his career, he has worked on a variety of topics including U.S. rice consumption patterns, global trade liberalization, farm program analysis, and supported emerging market projects to Taiwan, China, Vietnam, and Haiti.  In the early 1990s, Nathan was editor of USDA’s weekly Agricultural Outlook magazine.

Link to Register:  http://bit.ly/UAEX-USDA-GlobalRice-Outlook-Childs

Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: [email protected]

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

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