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Livestock Roundup: What goes up must come down?

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The Livestock Roundup

We posted 2 Ag videos today on our website; 1 Grains and 1 Livestock:

Cattle Commentary: The early morning cattle trade started out like another Groundhog Day with futures making contract highs basically across the board in live cattle and feeder cattle. As we have been mentioning, some of the early morning pain in runs like this can be margin call induced. It appeared by price action that funds were rolling out of December futures and into Feb/April today with December trading down 1.95 while Feb traded .925 lower and April just .45 lower. Cash cattle bids were heard to have come in at 120 in Texas today, so no ground given or taken since last Friday. We were on RFD-TV today advising that short speculators should tread lightly into the weekend in case of another post close high cash trade like we saw last week. Steer weights were up 3lbs and Heifers up 10lbs. Open interest has increased but is not yet to the lofty read in May when we saw it reach 431,718.

PM Boxed Beef Choice Select
Current Cutout Values: 208.25 193.16
Change from prior day: .86 .55
Choice/Select spread: 13.68

Cattle Technicals:

Live Cattle (December)

December live cattle futures screamed higher on the open, posting new contract highs for the fourth consecutive day. The surge higher on the open finally led to exhaustion as long liquidation ensued from those who have been hanging patiently long. Recent shorts feel somewhat vindicated, but we would advise caution as this could only be a top, not THE top. The relative strength index is still showing minor signs of exhaustion which could trigger some additional selling pressure in the near term. The first key technical support in yesterdays report came in at 123.825 and that managed to hold with December futures posting a low of 123.90. If the market does break and close below this level, we would not be surprised to see additional selling to close the gap at 121.625. First technical resistance tomorrow comes in the form of a pocket from 125.50-125.90.

Resistance: 125.50-125.90**, 127.65-128.60***, 132.225**, 134.55****

Support: 123.825**, 121.625***, 119.175-119.85**, 117.375-117.725**

Feeder Cattle (January)

January feeder cattle followed suit with the live cattle and made new contract highs on the open for the fourth consecutive session. Todays long liquidation from the funds who have been thought to have a record net long position has brought the RSI (relative strength index) back below the overbought line at 70, currently reading 63.67. 157.10 was first support in yesterdays report and the market managed to hold it. That support pocket from 156.775-157.10 will remain in play tomorrow. If the market breaks down below support, it looks to be a clear path to 155.25-155.55. The first resistance remains at 160.725-160.90.

Resistance: 160.725- 160.90**, 165.225****

Support: 156.775-157.10**, 155.55**, 149.70-150.20***, 148.74**

Lean Hog Commentary and Technicals (December)

December lean hogs where the month of interest today with significantly more volatility on a softening cash trade leading to long liquidation and funds rolling into back months. Even if cash stabilizes it could be enough to trigger additional liquidation, this is something that will be monitored very closely. Export sales this morning came in at 25,800mt with Mexico being the biggest buyer, this was up 42% from the previous week. On the technical side of things, the market traded below the support pocket in yesterdays report but managed to close above. This support pocket came in at 65.20-65.675. If this cannot hold on a closing basis, it could be additional pressure in the December lean hog contract in the near future. On the resistance side of things, 66.30-66.475 is the pocket the bulls will want to reclaim on a closing basis.

Resistance: 66.30-66.475**, 69.475-69.575**, 71.70-72.10****

Support: 65.20-65.675***, 61.50-61.90***, 60.14**

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About the author

Oliver Sloup is Vice President of Blue Line Futures, a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line Futures mission is to put the customer first, and that means bringing YOU the best customer service, consistent and reliable research and state of the art technology.  Oliver has been a guest on CNBC and Bloomberg, among others.  Oliver has over a decade of trading experience. Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.



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