Agricultural commodity markets this month have been impacted by a phenomenon that started after the November presidential election and climaxed last week with a milestone event. Think 20,000, as in the Dow Industrials all time high. In our Bower Trading Market Strategy Report, Jim Bower said the money flow to the equity markets has meant a flow away from corn, soybeans and wheat.
“What has happened kind of in general, broad terms, money or water flows to the path of least resistance and right now to the upside it’s been certainly the equities markets which have had a spectacular up move. When it does that there is a tendency for the commodity markets in general to be somewhat subdued, and since we haven’t had any kind of major weather event or major weather factor, we continue to see the capital flows go towards equities, not commodities, evidenced by the market acts you see in the market research bureau.”
In addition to more possible headwinds from the stock market, Bower says future market pressure or support could revolve around Mexico and South American weather.
“Well I am a little concerned about this whole tariff situation with Mexico and Canada,” he explained. “That’s going to take some time to work through and is very complicated. As far as a quick up move so far the weather has been reasonably optimistic for Brazil particularly, not quite as good for Argentina, but the one thing that might bump it pretty quick and pretty fast is that safrina crop or the second crop in Brazil would get in trouble like it did last year.”
For market strategies Bower favors bull spreads. Hear more on that in the full interview:Bower market strategy 1-30
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