Cattle Commentary: Cattle futures had the rug pulled out from underneath them Thursday afternoon, following a bullish USDA grain report. May feeder cattle traded in a 6.00 range on Thursday, trading 3.30 lower for the week. Friday’s Commitment of Traders report showed that managed money sold 2,487 contracts through March 27th, putting their net short at 206. Live cattle were not much better as we rounded out the week, month, and quarter. June fat cattle finished Friday’s session limit down, down 3.60 for the week. Last weeks Commitment of Traders report showed funds sold 22,942 contracts which shrinks their net long position to just 48,890; keep in mind this report is compiled through Tuesday and does not include Thursdays blood bath. The end of month/quarter along with margin call selling and bearish fundamentals have played a role in the recent down turn. Grain markets are higher in the overnight session, we will have to wait until 8:30am tomorrow to see if that translates into additional weakness (assuming grains hold).
Live cattle futures took a turn for the worst in the final hours of trade on Thursday as panic selling, margin call selling, and long liquidation worked together to press prices lower. The RSI (relative strength index) is now at 18.20, the lowest we have seen in some time. That does not necessarily mean the bottom is near, it just means the market needs to catch its breath. There has been an immense amount of technical damage and any rallies will likely be sold into in the intermediate term. The chart is a technical graveyard and the bulls have a lot of work to do before the can sleep in peace. The first line in the sand the bulls want to reclaim is 106. Markets often times over extend themselves in both directions and we would not count the 96 handle out with time. These were the March lows last year and would be a full retracement of the Fibonacci retracement levels we have been using since we peaked in November.
May feeder cattle completed their full retracement which goes back to the August lows. If the market cannot hold ground at 134 to start the week we could see the pressure continue and press prices down towards 131.5 which is the next line in the sand. If the bulls can manage to defend 134 on a closing basis, we could see the market consolidate back towards 139.75 which was in last weeks resistance pocket (that managed to hold). Only a conviction close above that level will neutralize the chart. The RSI (relative strength index is down at 28.45, this is oversold but of the lows we saw at the beginning of last week.
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