Cattle Commentary: Cattle futures started the session working higher but stalled out in to the noon hour and ended up rolling over hard in the final hour of trade. April live cattle finished the session down 2.50 at 122.65, trading in a range of 4.025. March feeder cattle finished the session down 2.40 at 144, trading in a range of 4.875 on the day. Cash trade this week has been non-existent as we head into the last day of the week, todays price action will work in the packers favor as many were expecting to see cash 2-3 higher this week. To put a fundamental catalyst on this afternoons move lower would be silly. This was a market that has rallied and ran out of juice, the inability to continue higher led to long liquidation and a rush to take profits ahead of tomorrow afternoons Cattle on Feed report. The average On Feed estimate is for 107.7 with the range of estimates coming in from 107.2-108.1. The average Placements estimate is 96.9 with the range of estimates coming in from 93.3-100.3. The average Marketing’s estimate is 98.6 with the range of estimates coming in from 97.9-100.3. We have been recommending the whole week that bulls and bears take advantage of the recent climb by either reducing long exposure (bulls) or adding short exposure (bears). Barring any fundamental shift in the overnight, we expect to see this pressure carry over into tomorrows session.
PM Boxed Beef Choice Select
Current Cutout Values: 206.77 201.32
Change from prior day: (1.22) .47
Choice/Select spread: 5.45
Live Cattle (April)
Live cattle futures poked its head above technical resistance, trading to its highest level since November 30th. The RSI (relative strength index) was running at its highest levels since early to mid-November as it approached 70. The market could not attract any new buyers at these levels which led to a rush for the exits, first by computers, then by brokers and traders. In yesterday’s report and earlier this week on RFD TV, we listed 122.15-122.80 as first technical support. This pocket represents the 50 and 100 day moving average along with a key Fibonacci retracement. A break and close below opens the door to accelerated selling pressure towards 120.20 which we mentioned is the ultimate objective in the near term. On the resistance side of things, 123.60-123.75 is the first pocket the bears need to defend.
March feeder cattle have been treading against key technical resistance for the better part of the last week. 147.75-147.85 was the line in the sand, this pocket represents the 100-day moving average and the recent highs. This was also a big level of support in November and the eventual breakdown point in December. The inability to attract buyers at these levels led to long liquidation. In yesterdays report, we wrote: “A failure to achieve a conviction close above resistance leaves the market vulnerable to long liquidation which could press prices back towards 143.50 and 142.60.” These levels are significant and represent key retracements, previously significant price points, and the 200-day moving average which is an indicator we have traded below but never closed below for this March contract. We would expect to see pressure carry over into tomorrows session. First technical resistance comes in from 144.90-145.475.
April lean hogs started the day on a high note, poking its head above our technical resistance pocket from 76.225-76.40 but failed to encourage new buyers into the market. The inability to build on that momentum led to long liquidation (similar to cattle today). April futures finished the session down 1.85 at 73.86, trading in a wide range of 2.80. We have been very clear cut about our bias being on the short side, believing that the fundamentals and technical provide little opportunity above technical resistance. The market tested but held our first level of support which we had and still have listed as 73.60-74.05. If the market sees follow through selling tomorrow, we expect to see the market run towards 72.45-72.70.
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