Live Cattle (December)
December live cattle continued to surge higher today, marking their highest price since August 1st. The seemingly non-stop, month and a half long rally has admittedly exceeded our expectations. The RSI (relative strength index) is in overbought territory, but that has done little to slow the buying. Short covering from funds have played a role as they flip from net short to net long, as mentioned several weeks ago, they don’t hold net short positions that long in cattle. There is resistance from 113.85-114.925. Obviously, a wide pocket, but an important one. This pocket contains the 200-day moving average, a key retracement, and the top end of the range from July. This coupled with an overbought condition could be enough to halt the rally.
Feeder Cattle (November)
Feeder cattle continue to defy gravity as prices have rallied nearly 20.00 in the last month and a half. That has taken prices into overbought territory, but it is far from an extreme reading. As with live cattle, the non-stop rally has surprised us to say the least and there could be more room to run on the chart. If the bulls can continue to defend 145.00-145.50 through the week, we could see a run towards 149.275-150.15. Consecutive closes back below 145.00 could spark a round of long liquidation and take prices back towards 140.00.
Support: 145.00-145.575**, 140.975-141.35***, 137.325***
Lean Hogs (December)
Lean hogs gaped higher on the open, filled the gap within 10 minutes and continued to drift lower through the remainder of the session. The minute to minute, day to day volatility will likely continue which makes it tough to get overly aggressive on either side. From a longer-term perspective, we remain optimistic but need to see a conviction close above technical resistance, we have had that defined ass 70.15-71.55. This pocket represents the too 200 day moving average, trend line resistance from the contract highs, and other previously important price points.
Resistance: 70.15-71.55****, 73.975-74.25***, 77.80**
Support: 68.325-68.75**, 67.30**, 65.50*
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