February Lean Hogs broke down and traded to the lower end of its trading range, while the cattle markets rallied, trading to the upper part of their respective trading ranges. Lean Hogs tested the 200 DMA (65.10) today, trading to the low at 64.975 and settling just above the 200 DMA at 65.20. With positive news lacking on the trade front traders focused on the excessive premium of futures over cash. The Lean Hog index is at 56.12 as of 12/7/2018 and futures settled at 65.20.Futures as of the close are 9.08 above the index. It is usually around 3.00 higher than cash at this time of year. I think the higher premium is the result of high expectations of China needing to buy US pork. They have come in the last 2 weeks and bought pork from the US. Traders need to see that continue.The trading range for the futures is 69.50 – 63.85. A break down below the 200 DMA could test support at the 21 DMA (64.55) and then the trading range low. If the market recovers off the 200 DMA, it could test resistance at 66.325. Feeder Cattle led the cattle markets higher as the January contract rallied to the 200 DMA(145.575) and settled nearby at 147.30. A strong open on Wednesday morning could see price test resistance at 148.40 and then the trading range high at 150.00. A failure from the 200 DMA could see price consolidate within the Tuesday range. A weak open tested support at 120.75 with February Live Cattle making its low at 120.475. A rally followed as it was dragged higher with the strength in Feeder Cattle leading the way. The rally pushed price past resistance at 121.90 to the high of the day at 122.50.The trading range high is just above it at 122.55 and resistance is just above here at 122.825. A breakout above resistance could see price move towards resistance at 124.30. A failure could see price consolidate within the Tuesday range.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, December 13th 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.