Livestock Roundup (7.30.18)
Jul 30, 2018
LEV8: -.85 at 109.625, trading in a range of 1.95
LEZ8: -.70 at 113.45, trading in a range of 1.70
GFQ8: -.775 at 151.525, trading in a range of 1.80
GFU8: -.725 at 151.45, trading in a range of 1.75
Cattle Commentary: Live cattle tripped stops above the 200-day moving average and Friday’s high but failed to attract new buyers to stage a legitimate breakout. The inability to feed off the momentum invited the sellers back into the market (see full technical breakdown below). Cash cattle came in late last week with the bulk coming in near 112 live and 177 dressed, this was roughly 1 lower from the previous week. Friday’s Commitment of Traders report showed funds bought 11,147 live cattle futures and 2,980 feeders, expanding their net position to 45,103 and 3,909 respectively. In recent reports we have been fairly outgoing in our bearish stance against the top end of resistance, our tone is starting to turn as the technical landscape continues to shift.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 204.72 / 197.98
Change from prior day: / (.42) / (.29)
Choice/Select spread: / 6.74
Live Cattle (October)
With August futures going into first notice day soon we are turning the focus towards October which will be the most active contract. The market managed to hold Friday’s lows of 108.975, close to a rough trendline that comes in just above 109. If the market breaks and closes below this level, we could see an acceleration down towards 107.80-108.175. With that said, we don’t mind dipping the toes in a little early and getting more aggressive at that pocket. As mentioned in the Weekend Update, the 50-day moving average is a few days away from crossing above the 100-day moving average, this is refereed to as a “Golden Cross” and is looked at as bullish. It is not a short-term indicator but a longer term one, so temper the expectations.
Resistance: 111.225-111.45**, 112.25-112.925***
Support: 108.975-109.15**, 107.80-108.175****, 106.25-106.35**
Feeder Cattle (August)
August feeder cattle traded both sides of unchanged today as the tug of war match continues between the bulls and the bears in what appears to be a bit of “no mans land” on the chart. If the market takes out Friday’s lows, we would expect to see that press prices back towards 147.95-148.60. This pocket represents the 50 and 200 day moving average, along with a key retracement on the year. As with live cattle, the 50-day moving average is crossing above the 100-day moving average, this is referred to as a “Golden Cross” and is looked at as bullish. It is not a short-term indicator but a longer term one, so temper the expectations.
Resistance: 154.45-154.925**, 155.50-155.975****, 159.20-160.00****
Support: 150.80**, 149.80**, 147.95-148.60****, 145.50-146.20***
Lean Hog Commentary and Technicals (October)
We have moved from August hogs to October as they will be the most active contract in terms of volume. October finished the day up .325 at 51.20, trading in a range of 1.375. Though we don’t recommend trying to catch a falling knife, we feel there is opportunity to play for a relief rally. We are looking at using call options, offering great exposure with limited risk, so it’s more like trying to catch a bowling ball. If the market can achieve consecutive closes back above 52.50 we could start to see new buyers step back in to the market. Trying to find technical support remains a fools errand with prices in uncharted territory.
Resistance: 52.425-52.625***, 55.675-55.975****, 57.575-58.275***
Support: 49.90-50.475**, 45.00*
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