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The cattle market was calm on the open, but started picking up momentum within the first hour of trade on conviction volume. Though the markets appeared to be aiming for a limit move, they fell just short in both live cattle and feeder cattle. The cash trade has been quiet this week thus far but should see more development tomorrow, this will be something to keep an eye on as it will likely play a major role in setting the tone for the rest of the week. Yesterday’s cold storage report came in at 487.812 million pounds, this compares with the estimates of 502 million pounds and the five-year average of 453 million pounds.
PM Boxed Beef Choice Select
Current Cutout Values: 200.13 192.69
Change from prior day: .88 1.64
Choice/Select spread: 7.44
Live Cattle (December)
December live cattle (live cattle in general) closed near limit up on the day on the back of a technical reversal yesterday. Yesterday’s inability to break down below technical support at 114.5-115 invited buyers back into the market this represented the 100-day moving average as well as trendline support from the August 18th lows of 106.725, this put a massive squeeze on shorts over the last eight hours of trade. That brings the market right to the top end of the trading range over the past three months. 119.175-119.85 is the resistance pocket the bears will want to defend going into the mid-way point of the week. If the bulls achieve a close above, we could see funds add to their large net long position and press prices towards the contract highs of 122.85 which we saw in June.
Resistance: 119.175-119.85**, 122.85****
Support: 117.375-117.575**, 114.425-115***
Feeder Cattle (November)
Like the fat cattle, feeders have reversed hard over the past 8 hours of trade. The inability to trade through technical support at 149.70 yesterday prompted the weak bears running for the hills. This line in the sand represents the 50-day moving average, and indicator that we will continue to monitor as it creeps higher. The market has now gone from the bottom end of the range to the top in in two sessions, technical resistance comes in from 156.175-156.975. If the bears can defend this level through the next few sessions, we could see profit taking from recent buyers.
Resistance: 156.175-156.975****, 158.025**, 160.90**, 165.225****
Support: 151.375-151.60**, 149.70-150***, 147.30-147.94****
Lean Hog Commentary and Technicals (December)
The cattle market saw a continuation of Mondays pressure but managed to finish the day in the green by nearly 1%. Yesterday’s monthly cold storage report showed frozen pork stocks at 616.3 million pounds, this was down 4% from last year but up 7.1% from the previous month. PM pork carcasses were up .66 to 76.46. On the technical side of things, the market failed to gain momentum at the top end of the range going back over the last 4 months. The inability to stage a technical breakout led to some long liquidation. We would not be surprised to see the market consolidate lower, 61.42-61.86 represents our first key support pocket. This narrow pocket represents the 100 and 200 day moving average and will keep the bulls in control until we see a close below.
Resistance: 65.20-65.675***, 67.825**, 71.325**
Support: 61.41-61.85***, 60.14**, 55.775-56.20****