Cattle Commentary: Cattle managed to squeeze out a positive day with the January feeders finishing up .45 at 146.10 after trading in a range of 1.55 on the day. Live cattle saw bigger gains with the February contract closing up 1.000 at 119.375, the trading range for the session was 1.675. Cash cattle trade has been quiet, but it appears things are starting to firm which is supporting futures. Yesterdays Fed Cattle Exchange had 704 head offered, only 75 sold at 116 with other bids being passed on at 116. Asking prices are still in the 118-ball park. It would be great to get some cash trading before the weekend to prevent a touchy Monday trade. As mentioned earlier in the week, we are now in a seasonal trend with the February live cattle contract. If you had bought February live cattle on December 13th and sold on December 28th, you would have been profitable 14 out of the last 15 years with the average gain being 2.41.
PM Boxed Beef Choice Select
Current Cutout Values: 201.04 183.69
Change from prior day: -1.44 -1.33
Choice/Select spread: 17.35
Live Cattle (February)
Live cattle futures staged another inside day which means they were contained within the previous days range; this marks the second consecutive day of this. The market found support from the 61.8% Fibonacci retracement from the August lows to the November highs, that comes in at 118.05. On the top side, the 100-day moving average at 119.375 has been the barrier the bulls have struggled to regain on a closing basis. If they bulls can attract new buyers above this level, we expect to see the market run back towards 120.70 which represents the middle of the trading range over the last four months. We know that funds still have a large net long position, a failure to get back above resistance level could trigger some long liquidation from the funds. A close back below 118.05 opens the door to the 200-day moving average at 116.65.
Resistance: 119.375**, 120.70***, 123.35-123.80****
Support: 117.575**, 116.24-116.65****, 114.375**, 109.475****
Feeder Cattle (January)
Feeder cattle have been consolidating all week along the 146 mark which represents the 61.8% Fibonacci retracement from the August lows to the November highs. If the market can hold ground above this level into the weekend, perhaps we see more buyers step in and press us back towards 148.90-149.075 which represents the 100-day moving average and the 50% retracement (middle of the range) from the previous four months. A conviction close back below the 146 level opens the door to the risk of accelerated selling pressure via long liquidation, the next line in the sand doesn’t come in until 142.60. This week’s consolidation has brought the RSI to 37, which is off of oversold levels but still on the low end of what is usual for this market.
Resistance: 148.85-149.075***, 152.10-152.475**, 155.55-155.95***
Support: 144.15-144.55****, 142.15-142.60***, 136.10**
Lean Hog Commentary and Technicals (February)
Lean hog futures saw a wide trading range today which squeezed some of the recent shorts. The February contract managed to finish the day up .90 at 67.70, this after trading in a range of 2.45 on the day. The markets inability to really breakdown below the 200-day moving average at 66.40 likely helped spark some of this rally, but bulls should temper expectations. We feel that the bears still have control from the fundamental and technical side of things. Key technical resistance comes in at 69.125, this represents a selling opportunity on the first test. A breakout and conviction close above would neutralize the chart. The RSI is currently at 45 which is essential neutral.
Resistance: 68.40**, 69.125***, 70.28**, 72.25-72.45**
Support: 66.40-66.925****, 65.40**, 64.75**
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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.