Cattle Continue Lower
Dec 05, 2017
Cattle Commentary: Cattle futures started out on the firm side if things but gave up gains and filled the gaps by midmorning. That quickly changed in the last hour of trade where we saw long liquidation lead to accelerated selling pressure across the board. We do know from Fridays Commitment of Traders report that funds hold a historically heavy long position for this time of year. Volatility often times invites more volatility leading to “irrational” price movement. February live cattle managed to gain back some of their losses but finished the day down .775, this after trading in a 3.05 range on the day. January feeder cattle finished 2.225 lower after trading in a range of 5.05 on the day. Cash trade has been non-existent for the most part this week. Tomorrows Fed Cattle Exchange has 653 head offered, this will be at 10am; last week there were 967 head with no sales. Last weeks cash trade was between 119-121.
PM Boxed Beef Choice Select
Current Cutout Values: 209.08 186.63
Change from prior day: .89 1.09
Choice/Select spread: 22.45
Live Cattle (February)
February live cattle closed lower for their fourth consecutive session, trading as much as 7.20 off of last Thursdays highs. In yesterdays report we noted 120.70 being the first level of support, this held on the first test but once broken ignited the whoosh lower to 119.575, a notch above our next support level of 119.36 which represents the 100-day moving average. That 120.70 will now become first resistance, if the market can make a push higher and close above here, we could see some near-term consolidation. The big move lower in a short amount of time does have the RSI (relative strength index) approaching oversold levels. We currently see the RSI at 36, for other markets a reading under 30 is a signal of exhaustion but cattle futures tend to be an exception; we are currently the third most oversold this February contract has ever been.
Resistance: 120.70***, 122.65-122.70***, 123.75**, 126.65-126.975****
Support: 119.36**, 118.05***, 116-116.50****
Feeder Cattle (January)
January feeder cattle broke down below technical support from 148.90-149.07 this represented the 100-day moving average and the 50% retracement from the August lows to the November highs. The break below led accelerated the selling down to 146.05 which is the 61.8% fib for the same time period. The recent down draft has brought the RSI down to 35, typically a reading below 30 represents exhaustion but the cattle complex is far from typical. This RSI reading the second most over sold readings we have seen for this January contract. Previous support now becomes resistance, that comes in from 148.90-149.07. If the market can achieve a close above, we could see the market take a much-needed breather and consolidate.
Resistance: 148.90-149.07***, 151.10-151.75**, 155.55-155.95***
Support: 145.62-146****, 144.15-144.55****, 141.65**
Lean Hog Commentary and Technicals (February)
Lean hog futures started the session on weaker footing and didn’t turn back. February lean hog futures closed 1.325 lower, this after trading in a range of 1.55. We feel that fundamentals have the ability to keep a lid on this market over the near term. Cash prices have been relatively mixed recently, it is the increase in weights that have some nervous we could see additional long liquidation from the funds. Fridays Commitment of Traders report showed funds were net long 63,561 contracts. Technical support from 69.15-69.70 managed to hold today, that will stay intact as we head into the midway point of the week. A break and close below could open the door to 68.475. On the resistance side of things, 72.25-72.45 remains intact.
Resistance: 72.25-72.45**, 73.30****, 74.50-75**
Support: 69.15-69.70**, 68.30-68.475***, 68.45**
If you’d like to know what we are looking at for any of the other commodity markets, please do not hesitate to reach out. Oliver@BlueLineFutures.com
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