Live Cattle Outlook
Market updates from Walsh Trading.
Live Cattle –
In four of the past five weeks Live Cattle made new highs. Last week was no exception. However, after making new highs on Thursday, sellers came in and a pullback resulted. The pullback formed a Bearish Engulfing candle. An engulfing candle formation is a two bar formation. The 1st candle’s open and close is engulfed by the 2nd candles’ open and close. It is considered a reversal formation. It can be either bullish or bearish. It depends where it takes place in the price action. This one is a bearish formation in my opinion. It also formed an outside day where it took out both the high and low of the previous day. It also covered the four days prior highs’ and lows’. This in my view is another negative condition. The weekly chart has also the makings of a reversal formation. Cattle had a strong rally 2 weeks ago and then made another new high this week. After making the new high Cattle couldn’t hold on to it. Buyers and sellers fought it out and ended up closing the week near the open. This is a Doji. The neutral end to the week in my view shows buyers are becoming cautious. A red candle close this week would form an Evening Star Formation. This is considered a reversal signal. If cattle takes out last week’s low at 164.40, sellers could take control. The 38.2% retracement lies in wait at 159.90 and the weekly 8 period simple moving average is at 158.6.
Please join me as I take a look at the Livestock markets on October 22, 2014. If you are not able to attend the webinar live, a recording will be sent to you if you register for the event.
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Tim Hannagan's All American Grain Report November 7, 2013
Nov 07, 2013
This is Tim Hannagan its Thursday, November 7. On Friday, November 8, the USDA will release its monthly crop report. This report shouldn’t be viewed as the normal monthly report because it will combine two months of data instead of the usual one month amount from The USDA. This report includes crop data from September and October. If it was for February and March when grains were locked up on the farm for a long winter’s nap, we would expect only marginal adjustments. But with crops planted late, September and October were instead growing months, lending thought that the market may be in for a large adjustment from the last report September 9th. In July and August there was much talk of lower yields due to late planting dates, fewer growing degree days, lack of sunlight due an excess cloud coverage, and a hotter and drier than normal August. Then the worm turned. A crop tour noted much higher than expected yields, bigger ears of corn and more fuller, as well as many more pods on each bean plant than the year prior. The talk was bio-genetic seeds won over the uneven growing weather. As the September and October harvest rolled along, the talk in almost every Midwest state was yields looked better than earlier road side observations. This has led to bearish pre-report trade estimates. Corn’s average production estimate was 14.029 billion bushels vs. the last report in September of 13.043. The ranges of estimates are 13.734 – 14.330. Yield was put at 159.2 vs. 155.3. Additionally, harvested acres are estimated to drop off one million acres to 88.0.
Soybean production estimates are 3.215 billion bushels vs. 3.149 with a range of 3.123 – 3.298. Yield is at 42.3 vs. 41.2 with harvested acres down one million acres at 75.8. The ending stocks look to increase with production. Corn stocks come the end of the 2013/14 marketing year September 1st are put at 2.044 billion bushels vs. 1.855 in September and 719 million bushels the year prior. The range is wide at 1.799 - 2.344. Beans are pegged at 177 million bushels vs. 150 in September and 125 last year. The range is 145 - 240. Wheat looks friendly at 529 million bushels vs. 561 and a range of 380 - 580. Based on production estimates the corn ending stocks look right as corn demand has not yet ignited. Bean stocks look tight as analysts see higher export numbers offsetting much of the higher production. The big surprise in the report would be that production numbers for corn and beans come in lower than expected. This is possible if the prior closing of the USDA has them not yet caught up. Then the December report will give a more final production estimate.
An overly bearish soybean report could see soybeans extend its correction beyond report day as prices are still too high. However corn has been dropping since February and by most opinions is oversold. Should the Friday crop report come out with overly bearish numbers, we should expect a sharp break that day. The report is the last bearish supply side report of the year, and then demand becomes our pricing source. With trend following funds holding a record short position to buy back, we are set up to put in a harvest low price report day and a great trade opportunity. Note, corn has a 40 cent limit that seems to be hit on report day. Option traders looking for a potential low risk trade on report day may consider this. For corn, buy December 4.00 puts and buy December 4.50 calls for 4.4 cents or $225.0 in cash value plus commissions and fees. This is a volatility trade to take off one side should a surprise move arise. For beans, buy the December 12.10 puts and buy the 13.40 calls for 10¢ or $500 plus commissions and fees. Beans have a 70¢ limit daily. Note, I am holding grain webinars every Thursday at 3:00 central time, just go to www.walshtrading.com to get the link for free admission.
Grain Analyst, Walsh Trading
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