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Upside Breakout in December Lean Hogs?


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Tuesday October 17, 2017

LEAN HOGS

I cant find anything fancy to report in hogs after they staged a possible upside break out yesterday. Volume was not heavy at just 35,700. Open interest did almost nothing, up 270 cars. We did notice the volume in hog puts, at over 8,000 was four times the volume in hog calls. The most active put was the Dec 55 putsare you kidding? The next highest volume put was in the Dec 60 puts which saw volume of just over 900 while open interest in this put increased by over 400. No doubt traders holding puts before yesterday are now actively rolling up their strike prices. Consider that the Oct contract, in mid-Aug staged a similar upside breakout from a bull flag formation. The contract went higher one addition session and they staged a massive outside day lower close. The contract then proceeded to break for four weeks and over $10. We suspect the Dec contract could be setting up a similar type pattern and fundamental situation.

LIVE CATTLE

Both LC and FC futures spun lower on Monday with no conclusions from the volume and open interest. Volume was 38,000 with open interest down 600. There were 34 deliveries against the Oct LC contact with the oldest long jumping to Sep 27th. Open interest in the Oct stands at 8,400. Very light trade was reported yesterday in IA at $1.10. Basically the trade is pumped up for a strong cash trade not a weaker trade. Last week packer paid $1.11 to own slaughter inventory. We saw a report published yesterday that suggested that 40% of the open interest in FC is comprised of fund long positions. When they realize that beef production in this quarter is projected to be record high in tandem with record large pork and poultry production, if they all head for the exit at the same time, triggering off the same technical indicator, look out.

For a free 30-day trial to the evening livestock wire please send an email to: dennis.smith@archerfinancials.com

The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).



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About the author


Dennis Smith has been a full service commodity broker specializing in grain and livestock trading for over 25 years. Dennis has a wide range of customers, many of whom are grain and livestock producers. Dennis develops and helps execute hedging and speculative strategies in his Daily Livestock Wire which is prepared each afternoon exclusively for his customers.

Dennis grew up in Central Illinois before launching his brokerage career.

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