The February Lean Hogs contract opened above the 68.75 resistance level and then failed to hold it and saw some follow through selling from Friday’s limit down move. It traded past support at 67.80 and the rising 50 DMA at 67.65 to the session low at 67.55. It was able to hold the 50 DMA and recoiled, trading up to the session high at 69.225. Once again it failed to stay above resistance and fell back and settled at 68.625. It formed a hammer candlestick with a short wick on top. It remains in the 70.05 – 65.40 consolidation range with the failure to climb back into Friday’s range. The hammer formation after the strong decline occurring on a test of support at the 50 DMA that stopped the selling could indicate a possible recovery is forthcoming. If price can rally past the Monday high, a test of resistance at 69.90 and then the 13 DMA at 70.43 is possible. A failure from settlement could see price revisit support at 67.80 and then the rising 50 DMA. The 100 DMA is next at 67.06. The Lean Hog index rose and is at 58.62 as of 01/02/2019. The Pork Cutout Index declined and is at 74.15 as of 01/03/2019.
The February Live Cattle erased the losses from the past two days and then some… It opened above Friday’s settlement and dipped to the session low at 124.725 then gathered steam rallying to the high of the day at 127.425. It was 0.30 away from a limit up move for the session. It is also back in the upper end of the 127.90 – 123.30 trading range. It settled near the high at 127.275. If settlement holds, a test of resistance at 128.10 is possible. A break out above here could see price approach resistance at the March 1, 2019 high at 130.45. A failure from settlement could see price test support at 125.80 and then 124.30. Cash trade was at a standstill in Kansas and the Western Cornbelt. In Nebraska negotiated cash trading was light on very light demand. It traded at 199.00 on a dressed basis. Boxed Beef cutouts were higher on good demand and heavy offerings. Choice cutouts rose 1.16 to 209.65 and select was up 1.41 to 206.80. The choice/ select spread narrowed to 2.85 and the load count was 165. Slaughter was estimated to be 121,000.
March Feeder Cattle opened at Friday’s settlement and down ticked to the session low at 142.375. This is right in between strong support at 142.40 and the 200 DMA at 142.07. In a stunning turnaround, price blew past resistance levels at 143.50, 144.25, 145.05 and 146.20 to the session high at 146.925. Price was 0.25 from going up limit. It settled above the 146.20 resistance level at 146.35. The high took out the December 13, high at 146.65 for new high after making the low at 141.325 on 1/2/2020. What a wild ride. If price can hold above settlement then at test of resistance at 147.30 is possible. If the bears panic a run to 148.40 is possible. If settlement fails, the consolidation within the Monday range is likely. The Feeder Cattle Index rose and is at 146.53 as of 01/03/2020.
Happy New Year. I hope you have a successful year in 2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, and our next webinar will be on January 9th at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109,
www.walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.