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Have cattle peaked?


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Blue Line Express

The Livestock Roundup

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Cattle Commentary: Cattle bears saw a second straight day of vindication, with the December live cattle trading off as much as 4.375 from last weeks new contract high. The bulls remained resilient, using the pull back as an opportunity step back in on the long side, bring the market back to the marginally lower area. You can see the funds rolling out of December and into the deferred months by price action and changes in open interest. Cash trade continues to be the talk with many new bulls coming out of the wood work. Asking prices are said to be 125-130, we will hopefully get a better idea on cash activity tomorrow with the Fed Cattle Exchange out in the morning; there are 1,191 head listed.

PM Boxed Beef Choice Select
Current Cutout Values: 212.64 197.76
Change from prior day: 2.07 2.99
Choice/Select spread: 14.88

Cattle Technicals:

Live Cattle (December)

Long liquidation was the name of the game in the early afternoon as funds rolled out of December futures and extended their position in deferred month contracts. This long liquidation in December futures has relieved the relative strength index which now has a reading near 64, well off of the near 80 read we saw late last week. Technical support in yesterdays report came in from 123.825-123.90, this level was tripped, and caused some accelerated selling pressure that was bought up quickly. The snap back and close above technical support does not do much chart damage so recent sellers should be cautious of claiming victory just yet. Technical resistance remains intact from 125.90-126, a break and close above will likely extend the rally to new contract highs. Tomorrow will likely be a pivotal day in setting the tone for the rest of the week as the market may get a fundamental catalyst to encourage an active technical trade.

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 were under pressure today but finished the session off of the lows. The RSI (relative strength index) remains lofty at 66.25 as it is still just a stones through away from Fridays contract highs. Continued consolidation would not be such a bad thing for the market, but should be worrisome if you are in the bear camp (see bull flag). Bears need to see a technical breakdown to encourage funds to liquidate their near record long position. First technical support in yesterdays report came in from 159.525-159.975 which was tripped by a hair with the market posting a session low of 159.40. On the resistance side of things yesterdays levels are also in play from 160.725-160.90.

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

Support: 159.525-159.975**, 156.775-157.10**, 155.55**

Lean Hog Commentary and Technicals (December)

December lean hog futures marked their fifth day lower today on the back of long liquidation due to a new trend of a lower cash trade, this after marking contract highs last week. The last time the market has seen this kind of sell off was in August when we traded 65.35 down to 55.775 in the matter of two weeks. The lean hog market can be unforgiving so be sure to manage risk accordingly. The swift move lower has brought the RSI (relative strength index) back to neutral with a reading of 51.5. First support from yesterday held on a closing basis so that will remain intact from 63.675-64. We would expect to see some consolidation but would not recommend catching this falling knife as there may not be much significant support until the 100 and 200 day moving average from 61.70-62.

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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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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