The August Live Cattle opened (117.75) below the 100 DMA (117.975) on Thursday, June 15, 2017 and dipped down to 117.10 before rallying to the high of the day at 118.50. It couldn’t hold onto the rally and the August contract fell to the low of the day at 116.975. Live Cattle recovered from here and ended the session in the upper half of the day’s range at 118.00. Thursday’s trade traded below the May 18 low (117.475) but was able to close above it. It is also right at the 100 DMA and the session ended in a spinning top candle formation. This indicates indecision in the market. If price can rally above the 118.50 high on Friday, a test of the gap from the 6/13 low (120.60) to the 6/14 high (120.425) is possible. A breakdown from the 100 DMA could lead to a test of the Thursday low and then support at 116.075. Support then comes in at 114.425. The cash market was under pressure today as the increase in the show list size from last week (250,000 last week to 300,000 this week), gave packers the advantage in pricing. Cash prices started out the week trading at the highs around $134.00 live and $217.00 dressed and has traded lower to $127.00 live and $208.00 dressed. Bids continue to back down and are at $126.00 for live cattle and $205.00 for dressed. Boxed beef cutout values were lower this afternoon on light to moderate demand and moderate offerings. Choice cutouts were down $1.29 to $249.74 and select down $0.13 to $220.53 on 126 loads. The choice/ select spread is at $29.21. Thursday’s estimated slaughter is 117,000, even with a week ago and above last year’s 108,000.
The August Feeder Cattle contract tested support early Thursday morning as it broke down below the trendline at 145.80 and traded down to support at the May 11th low at 144.65, reaching the low of the day at 144.75. Support held as the August contract rallied to the high of the day at 147.775. A retest of trendline support took it down to 145.80 before rallying back to the high and ending the session strong at 147.55. Thursday’s trade brought Feeders back into the middle of Wednesday’s 149.40 to 145.55 trading range. If Feeder cattle can rally above the 50 DMA (148.175), a rally to resistance at 149.975 is possible. If stops are set off above here we could see a retest of resistance at 151.85. A failure from the 50 DMA could put pressure on the August contract and we could see a retest of trendline support at 145.875 for Friday’s trade. A breakdown from here could see a retest of the Thursday low.
The July Lean Hogs continued to trade within its 83.80 to 80.45 trading range, just about covering the entire range in Thursday’s trading session. It opened up at 82.85 and rallied to a lower high (83.45) from Wednesday’s trading session (83.675). It broke down and tested the 82.375 support level, reaching a low at 82.475, consolidated for the next hour as it tried to rally but failed to hold above the 83.025 opening 5 minute high and spiked lower to the low of the day (80.725). Yes that’s right; a greater than $2 move lower in 15 minutes, with the bulk of the breakdown ($2.05) occurring between 10:10am and 10:11am. That decline didn’t hold as the recovery came within that bar as it closed the bar at 81.50. It spent the rest of the day trading between 81.50 and 82.50, ending the session at 82.075. A rally above 82.375 could lead to a retest of resistance at 83.80 and a sustained trade below could see a retest of the 80.45 support level. A break out from these levels could lead to our next support and resistance areas. A break out above 83.80 could lead to the 86.275 resistance level. A break down from 80.45 could lead to a test of support at 77.90.
For those interested I hold a weekly livestock webinar on Friday, June 16 at 3:00pm. 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.
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Senior Market Strategist
Walsh Trading, Inc.
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.