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Cattle Commentary: The cattle complex was under pressure for majority of the day with December live cattle trading $1 lower to 119.575 and January Feeders finishing the day $3.050 lower to 153.925. The cash trade has been relatively light this week with bids coming in at 119 today in Texas and Kansas. There were also some talks of sales in South Dakota from 117-118. Tomorrows Fed Cattle Exchange has 969 head listed. Smaller show lists are expected along with packers purchases into the week of Thanksgiving where demand tends to soften up. Funds remain long and strong, yesterday’s commitment of trader’s report showed funds added 10,800 contracts last week. This was their ninth consecutive week of buying and puts their net long position near 131,000.
PM Boxed Beef Choice Select
Current Cutout Values: 210.67 193.49
Change from prior day: -2.14 -.34
Choice/Select spread: 17.18
Live Cattle (December)
December live cattle continued their downward slide today on the back of what appears to be long liquidation from the heavily long funds. As we have been mentioning for the past two weeks, volatility often times invites more volatility into the market and that is what we have seen in this market. The market tripped below our first technical support from 119.175-119.85 but managed to battle back into the close to finish in the middle of that pocket. With some fundamental news on the horizon we could see the market cool of or consolidate in the very near term so long as support holds. If liquidation continues the next significant support pocket comes in from 117.50-117.85. First technical resistance comes in from 121.625-122.00. The recent selloff has brought the RSI back down to 47 which is near neutral levels.
Resistance: 121.625-122.00**, 123.825-123.90**, 125.90-126*
Support: 119.175-119.85**, 117.50-117.85***, 114.81-115.37****
Feeder Cattle (January)
January feeder cattle saw heavy pressure in today’s session on long liquidation from funds. Softening fundamentals has led to a technical breakdown which has created the accelerated selling pressure. The market sliced through the 50% retracement early which led to an extension down near our next technical support which remains intact at 153.475. The volatility has picked up over the last few weeks which has likely led to outside market participation, only adding to the volatility. If the market sees continued pressure and a close below 152.475-152.75, we could see selling accelerate and funds really hit the exits. Previous support now becomes resistance, that first pocket come in from 155.10-155.55.
Resistance: 155.10-155.55**, 158.70-159.27***, 160.725- 160.90**, 165.225****
Support: 153.475**, 152.475-152.75****, 148.16***
Lean Hog Commentary and Technicals (December)
December lean hog futures had their biggest selloff in a long time, finishing the day 2.375 lower to 59.925. Slower demand and increasing supplies have led to softer cash which has been a major catalyst to start the month, but some are suggesting it may be over extended after todays move. We now see the Dec futures at a $5 discount which compares to the five-year average of a $1.50 discount for this time of year. Yesterday’s commitment of trader’s report showed that funds increased their long position last week by 15%, putting their net long at 78,206 futures and options contracts. Though the market has sold off for 10 consecutive sessions now and has trimmed off nearly $10, the RSI (relative strength index) is only at 36. The rule of thumb for the RSI is a reading below 30 signals exhaustion. 59.90-60.14 held today but that doesn’t seem to mean much as of late. The bottom is a process not a point, but we are starting to see some signs of potential risk reward setups.
Resistance: 61.65-62.00**, 64.20-64.32**, 65.20-65.675***, 68.175**
Support: 59.90-60.14**, 57.36*, 55.775-56.20****
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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.