The information and opinions expressed below are based on my analysis of price behavior and chart activity
February Live Cattle
Today the February Live Cattle contract closed up 2.025 at 188.000. That’s the highest close since October 30th and that takes out the last two weeks of highs. There is a Cattle on Feed report due out this Friday, the 22nd, at 2 PM CT. That may be a market moving report, but we won’t be able to trade on those numbers until Monday morning. Last week’s trade saw the market open and close the week at almost the same price, posting a Doji on the weekly chart, and that usually indicates a place of price equilibrium to me. Put another way, the bulls had a chance and the bears had a chance, nobody could win, so we came back to where we started. On the daily chart above, you might notice that following the October 29th high, prices retreated and found some support in the form of the 50-day moving average (grey), as the market tested that average on Monday and Friday of last week. Today’s trade looks to me like a bullish breakout and points toward a test of the overhead trendline resistance (red horizontal), about 189.90, or so. The market is back above all of the moving averages on my chart, with the nearest one, the 200-day (purple) below the market at 186.60 or so. The 100-day and the 10-day are both near 186.13. The short-term averages, the 5-and 10-day, should cross into bullish territory tomorrow on the open, assuming that the market opens at or near where it closed today. I wouldn’t expect another 2.00+ up day tomorrow, but I would expect to see another move higher. This market usually does not string large-move bullish days together. And the few times this year that we’ve seen large-move days one after the other, it’s been to the bearish side. And a 2.00 move would put prices right at the trendline resistance. Nearly anyone who has been a short seller in this market during November, is now losing money and that may spur some margin liquidation, or buying interest. The recent pullback wasn’t huge and didn’t set any new lows or anything like that, keeping in line with a “normal” pullback in a bullish market. Seeing prices recover the way they have this week leads me to believe that the market may be trying to change the trend. As you may notice, on balance, the trend has been lower all year. A close above that 190.000 level could re-ignite the bulls and push prices back up toward that the 199.00 level, a price we haven’t seen in this contract since September 2023. Keep in mind that there is a Cattle on Feed report on Friday, after the close. A lot can happen over the three trading sessions between now and then. And depending on what the report says, that could be a major catalyst for trade into and during December. Aggressive and well-margined futures traders may do well to consider positioning themselves on the long side of the market this week. You should manage your risk in accordance with your account size, but I would look for an initial target near 190.00, should you get that opportunity before Friday’s close. Seasonally speaking, Live Cattle generally trend higher until expiration, but there is typically a bearish pullback within the first week or two of December. But seasonal patterns are not absolute, merely a guide. On the downside, if the market manages to close below the 50-day average, at 184.62 today, that would be a sign of failure to my eye and increase the likelihood of new contract lows. Hedgers may want to keep any eye out for price weakness and have a plan to manage potential price weakness. If you’d like to discuss ways to do that, please contact me directly.
Jefferson Fosse Walsh Trading
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