The February Lean Hogs contract opened at the session low (65.675) and soared. It traded up to the session high at 68.225 and pulled back, settling at 67.675. It was a nice rally trading past resistance at 66.55, the 100 DMA at 67.25 and a congruence of resistance at 67.80, the 8 (67.96) and 50 (67.96) DMAs on its way to the high. The pullback saw price settle below the upper resistance levels as bulls couldn’t hold the line. The candle formation is a bullish one however, as it formed a bullish engulfing candle in a declining market. If price can break out above the high, a test of resistance at 68.75 is possible. Resistance then comes in at the 21 DMA at 69.62. If price fails from settlement a test of support at 66.55 is possible. Tomorrow is the signing of the phase 1 trade deal with China, hopefully, we’ll see details of the agreement. The market should react to any news about future Chinese pork purchases. The Lean Hog index decreased and is at 58.99 as of 01/10/2019. The Pork Cutout Index decreased and is at 73.19 as of 01/13/2019.
The February Live Cattle contract continued its lackluster trade. It traded down to 126.30 and made its high at 127.25. Settlement was at 126.85. It formed a spinning top candlestick showing indecision in a consolidating market. The low was below the key level at 126.625 and it settled just above it. If price can hold support, a re-test of the Friday high is possible and then resistance just above it at 128.10. A break out above 128.10 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 inactive on light demand in all feeding regions. Boxed Beef cutouts were higher on good demand and light to moderate offerings. Choice cutouts increased 2.21 to 212.76 and select was up 2.07 to 210.30. The choice/ select spread widened to 2.46 and the load count was 120. Slaughter was estimated to be a healthy123,000.
March Feeder Cattle traded down to support at 145.05, making the low just above it at 145.125. It traded up to resistance at 146.20, making the high just below it at 146.125. It settled at 145.725. It formed the narrowest range in the past 7 days and a hammer candlestick. When this occurs, markets have a tendency to expand the range in the following days. If resistance is overtaken at 146.20, a test of resistance at 147.30 and then the 147.775 is possible. A failure from settlement could see price break down and test support at144.25. Support then comes in at 143.50. The Feeder Cattle Index ticked higher and is at 146.51 as of 01/13/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, and our next webinar will be on January 16th 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.