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Livestock Roundup (7.11.18)


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Last Trades:

LEQ8:-1.575 at 103.875, trading in a range of 2.80

LEV8:-1.575 at 106.25, trading in a range of 2.50

GFQ8:-2.40 at 149.45, trading in a range of 4.075

GFU8:-2.55 at 149.50, trading in a range of 4.25

Cattle Commentary: New news yesterday afternoon came in the form of another round of tariffs on Chinese goods, to the tune of $200 billion dollars. This rhetoric is nothing new and the markets reaction shows that headline risks are still alive and well. Sure, it may not have a meaningful direct effect on some agricultural commodities, but larger funds are forced to hedge against a trade war and the agriculture markets are an easy place to turn. Cash trade has yet to develop, with bids in the north surfacing at 108. Todays Fed Cattle Exchange was a skunk, no sales out of 365 offered. With the market coming off of resistance, we started getting more aggressive on the buy-side today (See technicals below).

PM Boxed Beef / Choice / Select

Current Cutout Values: / 207.44 / 197.14

Change from prior day: / .12 / (1.25)

Choice/Select spread: / 10.30

Live Cattle (August)

August live cattle broke down on the open, fining trendline support and a key retracement, both of which come in from 102.40-102.60. The retracement is derived from the November highs to the April lows. The trendline comes in from the May 18th lows, June 15th lows and June 27th lows. Higher highs and higher lows have been the trend for the last two months and so long as this pocket remains intact on a closing basis we feel optimistic about the value at these prices. Remember, price is what you pay, value is what you get. The market closed right on the 50-day moving average which will act as a pivot point for tomorrows session.

Resistance: 105.35-105.65***, 107.75-108.45***

Support: 102.40-102.60***, 101.65**, 100.40**

Feeder Cattle (August)

August feeder cattle retreated towards the low end of our support pocket which we had defined as 147.95-148.15, this pocket represents a key retracement on the year, the 200-day moving average, and trendline support from the May 17th lows, June 15th lows, and June 27th lows. We believe this pocket represents good value on the first test. A break and close below opens the door for a possible retest of 145.50-146.25. This pocket represents the 50 and 100 day moving average, along with the 50% retracement on the year. On the resistance side of things, the bulls need to achieve consecutive closes above 150 to get the train going towards new highs.

Resistance: 150.275-150.75***, 153.05-154.15***, 155.50-155.975****

Support: 147.95-148.15**, 145.50-146.25***

Lean Hog Commentary and Technicals (August)

August live cattle tried to stage a relief rally but lost the grip into the final minutes of trading. August lean hogs finished the day down 1.10 at 68.525, trading in a range of 1.95. The three-day selloff has brought the RSI (relative strength index) to its lowest level since we bottomed in early April. From a technical perspective, we are in uncharted territory so tread lightly. If you want to try and participate in a relief rally, be sure to manage risk, just because we are oversold doesnt mean we cant trade lower (see soybeans).

Resistance: 70.475**, 72.45***, 73.275-74.00**

Support: 68.50**, 64.00-64.50**

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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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