August 14, 2019
Live cattle futures traded both sides of unchanged and avoided limit down for the first time since Friday. Outside markets (equities) were down as much as 3%, not a 1-1 correlation but more of one when fears of a recession start to surface like we saw today with the yield curve inverting. Technicals in this market environment may be less meaningful as there are a lot of emotions and potential FOMO (Fear Of Missing Out) right now. Now that the market has started to trade and settle down the technicals will start to re-calibrate. 100.60-100.925 is the first pocket the bulls want to chew through to start repairing the gaps from the first half of the week. The RSI (relative strength index) is at 20.75, deeply oversold (not to say we can’t be more oversold). Cash trade has started this afternoon coming in at 105 in TX and KS, 106-108 in the north. This was better than what we were expecting to see and a sigh of relief. We believe there is opportunity in fat cattle, the deferreds may old the most value.
The move in feeders today was not surprising considering the current market environment, deeply oversold and discounted corn prices. We would not be surprised to see feeders continue higher but will consider using that as a selling opportunity, closer to 138, still a ways away.
October lean hogs managed to recover but remain in a bit of a range, call it 64-69. The bears have a bit of an advantage on the chart, but the fundamental backdrop may be more supportive to the longer-term bull camp. If the bulls can break out of the top end of the range, we wouldn't be surprised to see a run towards 75.
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