Cotton Markets
Cotton markets still looking for a bottom.

Saudi Arabian actions, Middle East instability, building market uncertainties

Market Outlook Considerations for the Week Beginning November 13, 2017 Markets covered: o Rice, Cotton, Soybeans, Corn and Wheat; o Select U.S. and Sector Equities; o Select Global Equities and Currencies; o Oil; and o Interest Rate - 10-year Treasury Yield

The big picture is relatively simple: two mighty Middle East powers, Saudi Arabia and Iran, are locked in a dangerous regional battle of “protecting their homeland through Middle East dominance.”

For these countries, regional homeland security starts at home, requiring a dominant or heavy handed centralized economic, social, political, and military control of their homeland.

Middle East Regional Conflict

Among the 17 Middle Eastern countries of Egypt, Iran, Turkey, Iraq, Saudi Arabia, Yemen, Syria, United Arab Emirates, Israel, Jordan, Palestine, Lebanon, Oman, Kuwait, Qatar, Armenia, and Bahrain are dangerous internal regional challenges. Any country lacking an aggressive defense strategy will not likely survive over time.

The Middle East, for all of its energy riches, has a population exceeding 410,000,000 people, many living in a highly unstable economic, social and political setting. If history is a guide, this region will consolidate as weaker countries fail. 

Dominant Military Powers

Beyond regional Middle East dangers, external dangers are building by the world’s dominant economic and military powers, including the United States and European Union, China, and Russia. As Middle East instability builds, the world’s biggest economic and military powers position to limit the impact to their countries.

Saudi Arabia Intends to be a Crisis Survivor

The young Crown Prince of Saudi, Arabia Mohammad Bin Salman, dealt his internal adversaries a possible knockout blow to near-term political opposition and economic power. As for the economy and social challenges, the prince has drawn up blueprints to move toward, at least in his mind, achievable near, intermediate and long term economic, social, political and military objectives to assure the survivability of his country.

The prince’s internal opposition simply had a memory lapse about the definition of their government type: absolute monarchy or “authority is not restricted by any written laws, legislature, or customs.”

Regionally, the Crown Prince is drawing lines in the sand for each of his Middle East neighbors as he defines and addresses acceptable and unacceptable political, military, and other levels of conduct by each of his regional neighbors.

Saudi Arabia is redefining itself in all ways from the economy to society, politically, militarily, and regionally, to global relationships.

The Prince has challenged Qatar and Lebanon’s perceived or actual building relationship with Iran. And within the Saudi Arabian Kingdom he arrested an array of Saudi princes, officials and major business leaders on anti-corruption charges.

The actions of the young Saudi Arabian prince speak volumes about Middle East instability, about the growing involvement of the world super powers in the Middle East, about potential oil supply interruptions and oil price uncertainty, and most importantly the regional struggle of Sunni monarchy governments vs Shiite religious governments as they compete to gain control and consolidate ever increasing parts of the region.     

What to expect from the markets this week, November 13, 2017

 

Market “Near Term” Snap Shot

·       Rice: This market is moving closer to confirming if current price action is corrective with another leg to the upside or if a near term top is in place (Charts 38 and 39)

·       Cotton: Slowly and almost begrudgingly confirming a bottom is in place (Charts 40 and 42).

·       Soybeans: A complex market that is likely building a base before moving higher, holding $9.70 likely important to near term price strength (Charts 32 and 34).

·       Corn: Assume bearish until price action becomes more supportive of a bullish case and give consideration to prices possibly moving to their previous 2016 lows of $3.15 or below (Charts 35 and 37).

·       Wheat: Wheat appears to have additional price weakness into the 3.90 area (Charts 43 and 45). 

·       10-year Treasury Yield: Remains in a Sideways-Trading-Range between 2.14 and 2.60 (Charts 1 and 3).

·       U.S. Dollar: •  Possible corrective action continues, but once complete the door is open for a decline to 87 (Charts 4 and 6).

·       Oil $WTIC: Fundamentals and global uncertainties increasingly supportive of this market. Price action to $55 now appears to be giving way to $61-plus becoming a consideration (Charts 29 and 31).

·       $CRB Commodity Index: Macro factors and chart structure imply continued cautious optimism, though some backing and filling may be in order (Charts 26 and 28) .

·       S&P 500: Cautionary time period. Consolidation or correction desirable not required. Allow price action to provide guidance (Chart 14).

·       Global Equities Excluding U.S. and Canada: Momentum slowly waning. Allow price action to provide guidance (Chart 16).

·       Feeder Cattle: Near term high likely in place .  

 

In addition to the following “Expanded near Term Market Outlook Considerations for Week Beginning November 13, 2017”

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

 

This Week’s Select Summary Considerations:

 

•        10-Year US Treasury Yield:

•        Remains in a Sideways-Trading-Range between 2.14 and 2.60.

•        Near term higher yields have been in part a function of U.S. and Global market intervention activities designed to extend domestic and global growth and the business cycle.

•        Lower yields are a function of: Demand, Economic Weakness, Event Risk Concerns, or Other Market Concerns/Factors could take the yield lower.

•        If the yield moved above 3.00 then consideration would need to be given to a change in trend.

•        Bond yields need to hold at 1.95 or serious consideration would need be given to ominous building economic problems.

•        U.S. Dollar Index:

•        Possible corrective action continues, but once complete the door is open for a decline to 87.

•        Given global macro considerations coupled with no significant global anomaly event moving forward this index may have some serious weakness.

•        Unless Middle East, North Korean, European, Venezuelan or other anomaly events start to dominate market participant decisions, then we are still in search of a low for the dollar.

•        CRB Index:

•        Macro factors and chart structure imply continued cautious optimism, though some backing and filling may be in order.

•        Global Government and Central Bank actual and anticipated intervention indicate a slow fruit bearing process underway.

•        Bigger Picture: Though dangerously spastic, global macro and growth forces in general remain supportive of the commodity sector.

•        $WTIC Light Crude Oil:

•        Fundamentals and global uncertainties increasingly supportive of this market.

•        Price action to $55 now appears to be giving way to $61-plus becoming a consideration .

•        A complex, volatile and an uncertain market now focused on Saudi Arabian and Iranian building friction, all  deserve heightened respect in a world with building economic, social, political and homeland security uncertainties.

•        North Korea, market structure, geopolitical considerations and building possibilities of a Venezuelan civil war are just some additional considerations.

•        Soybeans:

•        A complex market that is likely building a base before moving higher, holding $9.70 likely important to near term price strength. 

•        A world awash in liquidity, building economic momentum and many hard assets seemingly overvalued, be careful not to overlook the possible attractiveness of this asset to buyers and investors.

•        Corn:

•        Searching for a low, so assume bearish until price action becomes more supportive of a bullish case and give consideration to prices possibly moving to their previous 2016 lows of $3.15 or below.

•        Long Grain Rice:

•        This market is moving closer to confirming if current price action is corrective with another leg to the upside or if a near term top is in place.

•        Remain aware of potential near term uncertain global economic crosscurrents related to currencies, bonds, equities and commodities as they go through a rebalancing process.

•        Cotton:

•        Cotton slowly and almost begrudgingly confirming a bottom is in place.

•        Wheat:

•        Wheat appears to have additional price weakness into the 3.90 area.

•        SPY SPDR S&P 500 ETF:

•        Cautionary time period .

•        Consolidation or correction desirable not required. 

•        Allow price action to provide guidance.

•        $COMPQ Nasdaq Composite:

•        Passive investors have lifted this market to a level that one must now focus on the risk vs reward of holding the index near term .

•        Allow price action to provide guidance .

•        EFA iShares ETF - Global Equities Excluding U.S. and Canada:

•        Momentum slowly waning.

•        Allow price action to provide guidance.

•        EEM iShares ETF, Emerging Market Equities:

•        A cautionary time period with momentum slowly decelerating.

•        Allow price action to provide guidance.

 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

  DISCLAIMER-FOR-EDUCATIONAL-PURPOSES

 

 

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish