Cattle Commentary: Cattle futures were mostly lower yet again today. January feeders were the “bright spot” finishing the day up .05 at 145.275, trading in a range of 1.825. February live cattle finished the day -.675 at 117.625, this after trading in a range of 1.30 on the day. Todays close marked the 8th consecutive close lower, which puts prices at a 9.05 discount during that same time. Last weeks cash trade was mostly 117-118 with dressed at 187-188. Low prices often times cure low prices, meaning demand picks up as prices fall. Some analysts are suggesting that we could see that demand come in and offer near term support. This weeks Fed Cattle Exchange has 704 head offered, that will be on Wednesday morning. Fridays commitment of trader’s report showed that funds reduced roughly 4,000 contracts putting their net total at 116,000. On the feeder cattle side of things, funds were said to have reduced 1,000 contracts which puts their net long at 13,200 contracts.
PM Boxed Beef Choice Select
Current Cutout Values: 205.53 185.66
Change from prior day: -.06 -.31
Choice/Select spread: 19.87
Live Cattle (February)
February live cattle have been under a lot of pain over the past two weeks. As mentioned above, we have taken 9.05 off of prices in just 8 sessions. This pressure has brought the RSI (Relative Strength Index) below 30 for the first time in its contract life. The low RSI suggests that the market could be nearing exhaustion levels and we tend to agree. Though it’s not a sure thing, we feel a consolidation or relief rally would be healthy. We also see a seasonal trend around the corner for the February contract. Buying on December 13th and selling on December 28th has been profitable 14 of the last 15 years with the average gain being 2.40. Technical support levels have been nearly non-existent as long liquidation from the funds continues to pressure things. The 200-day moving average is the next line in the sand on the support side, that doesn’t come in until 116.40. On the resistance side of things, the 100-day moving average comes in at 119.35, ultimately, we are looking for a move back to 120.70.
Resistance: 119.35**, 120.70***, 122.65-122.70***
Support: 116.24-116.50****, 109.475****
Feeder Cattle (January)
January feeder cattle were the bright spot in todays trade as they attempt to consolidate near 145. Though we finished the day slightly positive, the market remains near oversold levels with the RSI reading 31.90. First resistance comes in from 145.60-146, if you recall, this was previous support last week. On the support side of things, the market really wants to see today’s lows hold, if that gives way we could see additional long liquidation towards the 200-day moving average at 142.25
Resistance: 145.60-146****, 148.88-149.10***, 151.10-151.75**, 155.55-155.95***
Support: 144.15-144.55****, 141.65-142.25***
Lean Hog Commentary and Technicals (February)
February lean hog futures took a hit today after failing to get out above the 50-day moving average at 69.15 (todays high was 69.12). February futures ended the day down 1.5 to finish at 67.35, this after trading in a range of 2.20. We have been looking for a retest of the 100 and 200 day moving average as well as the 50% retracement which all come in from 66.40-66.92; todays low was 66.925. A break down and close below this support pocket could accelerate selling towards 65.40 which represents a key Fibonacci retracement level. Heavy weights and lighter demand have been keeping a lid on any significant rally and will likely continue to. Fridays commitment of trader’s report showed that funds increased their net long position by 5,000 contracts to 72,000 contracts; keep in mind this information is compiled through Tuesday and does not take into account the back half of the week.
Resistance: 68.38-68.90***, 70.28**, 72.25-72.45**
Support: 66.40-66.92****, 65.40**, 64.75**
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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.