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What's next for the cattle market?


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Blue Line Express

The Livestock Roundup

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Cattle Commentary: Cattle bears finished the day feeling vindicated but should be wary of claiming victory just yet. Cash trade has carried futures nearly $13 higher over the past two weeks with good demand and exports being the leading catalyst. Cash trade will continue to be the key driver throughout the week, market participants are hopeful for a more active market but wont be holding their breath. Part of last Fridays rally was likely due to a squeeze on shorts not wanting to be stuck through the weekend with a big post close cash trade like we saw the previous week. Fridays commitment of traders report showed managed money was net long 120,456 contracts at the end of October, just a stones throw away from their record long 145,394.

PM Boxed Beef Choice Select
Current Cutout Values: 210.57 194.77
Change from prior day: 1.83 1.69
Choice/Select spread: 15.80

Cattle Technicals:

Live Cattle (December)

December live cattle futures saw some long liquidation to start the week on the inability to take out and break out above contract highs from late last week. The RSI (relative strength index) which was nearing 80 on Thursday has come back to 65.38. Although this number is lofty for the cattle complex, it should be taken with a grain of salt considering the current market environment. Volatility often times invites more volatility which so be mentally prepared to be nimble and take what the market gives you. First technical support comes in from 123.825-123.90, if that gives way on a closing basis we would expect to see continue liquidation to close the gap at 121.625. On the resistance side of things, the bulls want to hold this support pocket but ideally want to see prices close back above 125.90-126 in an effort to make another run at contract highs.

Resistance: 125.90-126**, 127.65-128.60***, 132.225**, 134.55****

Support: 123.825-123.90**, 121.625***, 119.175-119.85**, 117.375-117.725**

Feeder Cattle (January)

January feeder cattle spent majority of Monday session under pressure after failing against Fridays contract highs at 162.075. The inability to retain and gain strength against resistance led to some long liquidation which this was taken advantage of by the bulls. Although the market closed in the red, the last trade was 1.625 off of the low, finishing at the top end of our resistance pocket from last weeks reports which came in from 160.725-160.90. If the market closes above this pocket, we could see funds extend their long position and post new contract highs above 162.075 with the next target being 165.225 for bulls. First technical support comes at from 159.525-159.975. A break and close below could encourage profit taking towards 156.775-157.10.

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

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

Lean Hog Commentary and Technicals (December)

December lean hog futures were under pressure to start the week, closing lower for the fourth consecutive session on long liquidation and a softer cash trade as of late. The RSI (relative strength index) has come off of overbought levels and is now closer to neutral with a reading of 54.5, this pullback after a nice rally could lead to some consolidation which would be welcomed and healthy for the market. First technical support coming in to today came in from 65.20-65.675, this will now be the pivot point, a pocket the bulls will want to get back above. On the support side of things, there is some support from 63.675-64, the significant levels of support come in below from 61.678-62.

Resistance: 65.20-65.675***, 68.175**, 69.475-69.575**, 71.70-72.10****

Support: 63.675-64**, 61.687-62***, 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.

 

 

Contributing author since 10/6/17 

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