Livestock Roundup (5.16.18)
May 16, 2018
LEM8: -1.225at 101.75, trading in a range of 2.10
LEQ8: -1.45 at 98.95, trading in a range of 2.15
GFQ8: -1.675 at 136.775, trading in a range of 2.35
GFU8: -1.65 at 137.30, trading in a range of 2.35
Cattle Commentary: Cattle futures tried to gather their legs today but fell flat after failing to reclaim the 104 level, marking the highs of the day within the first hour of trade which we have seen more often than not recently. Today is the third day of selling, which means we could start to see margin call selling if the bulls cannot find their footing tomorrow. Cash trade this week is softer with the bulk of it coming in from 116-117, this compares to the 122 we saw late last week. Many market participants are expecting to see cash continue lower in the near term. Today’s Fed Cattle Exchange yielded 0 sales on 2586 head. This is a very interesting market environment as fundamental and technical traders continue to duke it you. With the basis so wide the fundamentals remain supportive, but the technicals have been in the bears control for the better part of the last three months (see technicals below). Boxed beef prices lost some ground again today.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 231.03 / 208.50
Change from prior day: / (.61) / (1.01)
Choice/Select spread: / 22.53
Live Cattle (June)
June live cattle notched their third consecutive close lower for the week, putting futures prices 6.00 off of Friday’s close. In yesterday’s report we listed first support as 101.20-101.85, this pocket was tested and managed to hold with prices finishing the day within that range. If the bulls cannot defend this pocket in tomorrows session, we would expect to see a move lower towards 96.35-97.05. This pocket represents the April lows and would be a full retracement to the March 2017 lows. On the resistance side of things, the bulls have their work cut out for them…..again. First resistance that was in yesterday’s report was tested and held, so that remains intact from 103.85-104.50.
Resistance: 103.825-104.50**, 106.05-106.75**, 107.575-108.10***
Support: 101.20-101.85****, 96.35-97.075****
Feeder Cattle (August)
The path of least resistance remains lower, and the recent trend of lower highs and lower lows has confirmed that. The technical breakdown this week all but guarantees we will at least test, if not break down below the April 4th lows of 135.00. If the market does breakdown from this level, the technicians are somewhat in the dark as this is unchartered territory. The RSI (relative strength index) is at 32.7, this is the lowest level we have seen since the April lows, but still just shy of being in “oversold” territory. Previous support now becomes resistance, that comes in from 137.00-137.80. If the bulls can reclaim this pocket on a closing basis, we may start to see the market consolidate.
Resistance: 137.00-137.80**, 139.95-140.375**, 143.95-144.80****
Support: 134.975-135.00****, 128.875***
Lean Hog Commentary and Technicals (June)
Lean hog futures continue to cop around, trading right in the middle of the range over the last month, leaving technical traders with little clarity. June futures finished the day up 1.05 at 75.775, this after trading in a range of 1.275. The market posted an inside day (trading within the previous days range), so technical support and resistance pockets remain intact. On the resistance side of things, that comes in from 75.85-76.30. This pocket represents the 50-day moving average, a key retracement on the years range, and recent highs. If the bulls can achieve a close above this pocket, perhaps that will encourage additional buying interest. On the support side of things, 73.90-74.075 is the significant level we are watching. A break and close below takes us to new contract lows.
Resistance: 75.85-76.30**, 78.05-78.70***, 79.60-79.90****
Support: 73.90-74.075****, 70.25-70.90***
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