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Volatile Day in Cattle


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Cattle Commentary: Cattle futures started todays trade moderately lower but took a hard turn lower near the noon hour. The volatility is likely due to end of month position squaring, December option expiration tomorrow could have also played a role. February live cattle touched limit down at 123.60 but spent nearly no time there as buyers expecting a higher cash trade saw this as an opportunity. We did see afternoon cash trade developed at 121 in Texas and Kansas; this is up from last weeks trade. Yesterday we mentioned wanting to see a cash trade develop to prevent any major anxiety going into the weekend. We have seen late cash trades develop after the Friday close recently and it can throw a wrench in things come Monday. January feeder cattle finished the day 1.40 lower at 154.175, this after trading in a range of 3.90 on the day.

PM Boxed Beef Choice Select

Current Cutout Values: 204.64 184.21

Change from prior day: -1.91 -1.63

Choice/Select spread: 20.43

Cattle Technicals

Live Cattle (February)

Live cattle futures were fairly quiet in the early morning trade but saw an immense amount of pressure as we headed towards the midway point on the session. The market saw accelerated selling pressure which is likely attributed to long liquidation from funds tying up loose ends at the end of the month. The market touched limit down briefly which happened to come in at 123.60, this represents the 50-day moving average which we have been referencing; a simple indicator but one we have not close below since September. Just below that is 123.30 which represents a key retracement from the August lows to the recent highs of 131.95. Todays reversal off of the lows was strong and fairly encouraging for the bull camp. On the resistance side of things, 126.65-126.975 remains a significant pocket. This was a breakout point on October 30th and also represents a Fibonacci retracement level. The market has posted higher lows for the past three months which keeps the bulls in control.

Resistance: 126.65-126.975***, 127.65-128**, 131.95****

Support: 124.35**, 123.25-123.35****, 120.70***

Feeder Cattle (January)

January feeder cattle saw a similar trade to the live cattle market today with a large amount of pressure coming into the market near the midway point of the session. The market held first support near 153.85 on the first test but gave way on the second test a few minutes later, this opened the door to long liquidation from the funds and pressed prices towards down to 152.15, just a hair above our next support level of 152.075. This whoosh lower was an excellent opportunity to reduce shorts or lift a portion of hedges (depending on ones comfort level). The reversal off the low should make for an interesting end to the week as volatility often times invites more volatility into the market. Tomorrow marks a new month which could also play a role in positioning. Although we saw first support taken out, the close above keeps it intact as an intraday marker.

Resistance: 155.10-155.55***, 156.40-156.75**, 158.70-159.27***

Support: 153.325-153.85**, 151.75-152.075***, 148.175****

Lean Hog Commentary and Technicals (February)

The cattle complex was not the only market that saw some end of the month volatility come into the market, lean hogs did too. February lean hogs finished the day down 1.10 at 69.80, this after trading in a 2.25 range on the session. Higher weights have weight on the market, pun intended. USDA reported the average hog weight for the Iowa/southern Minnesota/South Dakota reporting area at 285.5 pounds, up 1.3 pounds from the previous week. The past two sessions have erased the previous three days of gains but prices remain elevated above the recent lows. If fundamentals continue to keep a lid on the market, we could see some long liquidation from the funds press us back towards that 67 marker. Speaking of funds, we will get an updated Commitment of Traders report tomorrow that will give us a better idea of where they stand.

Resistance: 72.45**, 73.30****, 74.50-75**

Support: 69.15**, 68.30-68.475***, 66.30-66.90****

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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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