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Livestock Roundup (4.4.18)

Published on: 23:09PM Apr 04, 2018

Last Trades:


LEJ8: .975 at 112.95, trading in a range of 3.80

LEM8: 2.90 at 102.525, trading in a range of 5.55

GFJ8: 4.10 at 134.625, trading in a range of 6.45

GFK8: 4.10 at 135.075, trading in a range of 6.60


Cattle Commentary:  The bulls feel vindicated today as the market surged higher mid-session putting prices right back to where we were on Thursday.  Retaliatory tariffs early this morning was released from China and beef was included on the list of 106 products.  At first glance to you would think this is the most bearish headline ever and you would probably be right, but it is just that, a headline.  China is not a significant buyer of our beef and what they do buy has likely been put into the market already.  In yesterdays report we mentioned wanting to see panic and capitulation, this somewhat misleading headline gave us that panic which we viewed as a gift.  We were reaching out to clients via call/text/email letting them know that we like buying the panic.  Some clients prefer futures, but we were primarily interested in shopping for calls (primarily 105 June calls), this gives us the ability to sit through a volatile market with defined risk.  The market rallied hard off of that panic open and sucked in bottom pickers, the market ran out of steam and likely shook some of those bottom pickers out, only to rally back and closing near limit up.  Again, this is why we like options in this market environment.  Tariffs in the grain markets sent those markets lower which helped offer some support to the feeder market which finished near limit up.   April fats struggled to get as much momentum with cash continuing to fall. 


PM Boxed Beef / Choice / Select

Current Cutout Values: / 218.17 / 206.18

Change from prior day: / (1.51) / (3.15)

Choice/Select spread: / 11.99


Cattle Technicals


Live Cattle (June)


After the breakdown from 106 we cautioned that the 96 handle was not out of the cards, we got close to that today with the low coming in at 97.075.  Today’s trade was a “key reversal” by definition with new lows on the move made but closing at the highs, the volume on the move was very encouraging as well.  As of right now we are viewing this as a relief rally and trying to temper expectations; a bottom is likely in but is it THE bottom.  The RSI was at 14 yesterday, today’s rally resurrects that indicator to 29, still in “oversold” condition.  The first barrier in tomorrow session comes in from 104.00-104.60 with the ultimate objective coming in.....Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.


Feeder Cattle (May)


Feeder cattle managed to firm up nicely and like the fat cattle, they staged a “key reversal” by definition.  We continue to believe that bottoms are a process not a point so although today’s price action was encouraging, we recommend tempering the expectations.  To keep things in perspective, this is basically where we finished Friday.  Today’s rally brought the RSI out of “oversold “conditions, finishing the day at 38.27.  With new lows come new Fibonacci retracement levels, the first line in the sand comes in at....Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.


Lean Hog Commentary and Technicals (June)


June live cattle futures punched below our 4-star support level at 70.50, marking a low of 70.25 the rebounding to finish the day up 1.65 after trading in a range of 3.535 for the session.  The additional tariffs from China likely led to weakness on the open but this has already been baked in.  Today did mark a “key reversal” by definition but we would error on the side of caution for buyers.  You don’t have to go back too far to see a similar day like this (March 28th).  With new lows comes new Fibonacci retracement levels, the first line of resistance tomorrow comes in at....Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.


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