Cattle futures finished Friday’s session well off the lows which is likely due to the lack of cash trade into the futures close; a lack of cash trade had shorts worrying that packers would pay up. That was not the case Friday afternoon. Cash came in at 122 Friday evening in Tx, Ks, Ne, Wy, and Co. This compares to the 126 we saw in the previous week. It will be interesting to see how the board responds Monday morning. The initial thought is that we will see a lower open, but the wide basis still offers support to the bull’s thesis. Friday’s Commitment of Traders report showed that managed money bought 2,007 futures, putting their net long at 13,438 futures. This is not a substantial change but could start to signal a trend change as funds have been in liquidation mode for the better part of the last 2 months.
Thursday’s price action in June live cattle yielded the first close above the 50-day moving average since March 5th, this along with a key retracement at 106.05 will act as first support to start the week; 106.05-106.90. If the bulls can hold ground above this pocket on a closing basis, we could see futures work to that 109 level that we have been talking about for several weeks now. There are several barriers a stone through above that level which leads us to believe that there may be limited juice in this grape left in the near term. It has been a sideways market for the last month which has sucked premium out of options. If you want exposure and want to ignore the intra-day or day to day fluctuations, long options (puts/calls) would be something to look into.
On the feeder cattle, the chart has several more caution flags. We have seen the market make lower highs and lower lows for two weeks now, breaking down below several retracement levels, previously important price points, and moving averages. The 50-day moving average is working lower and likely a week away from crossing below the 200-day moving average. The bears will remain in control here until the bulls can achieve a conviction close above 144.95-145.50 (August).
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