Live Cattle
The August Live Cattle contract opened (120.925) lower on Tuesday, May 24, 2017, and then traded down to the lows for the day at 118.65 (almost a limit down move), as expectations for a lower cash trade on the fedcattleexchange.com auction took hold and were then realized. Last week the auction saw sales between $133.75 and $135.75. This week’s auction had sales between $131.00 and $133.00. There 2,648 head for sale with 1,333 sold at the online auction. The futures market bottomed just after the auction and a recovery took place to 120.55. The session ended at 120.175 with a hammer candlestick formation. The August contract is right at the 120.075 support level and a breakdown from here could send price down to test the Wednesday low. The 50 DMA is nearby at 118.275 and the 100 DMA is at 117.25. A rally above the Wednesday high (120.975) could lead to a test of resistance at 121.45 and then 123.30. The cash market traded at $132.00 in Kansas after the auction as trading remained quiet on that front. Boxed beef cutout values were mixed with choice cutout up .34 to $246.08 and select down $1.57 to 219.60 on 144 loads. The choice/ select spread is at $26.48. Estimated slaughter for Wednesday came in at 115,000 head, up from 114,000 a week ago and last year’s 113,000.
Feeder Cattle
The August Feeder Cattle contract gap opened lower (150.75) and crashed. It nearly went limit dawn as it traded to its low at 147.125. It had a recovery rally in line with the Live Cattle market and test the 149.925 resistance level as it reached 149.95. It reversed lower from here and ended the session at 148.95. Resistance for Thursday will is at 149.925, then the gap area from the Wednesday high at 151.025 and the Tuesday low at 151.275 and the 38.2% retracement level (May 4th high (163.50) to the May 11th low (144.65)) at 151.85. Support is at the Wednesday low (147.125), 146.10 and then 144.65.
Lean Hogs
The July Lean Hogs continues to trade around the 80.45 resistance level. It reached a high of 80.85 before failing and grinding down to the lows at 79.625. It ended the session at 79.625. The session high is a new high for the up move, but the breakdown in price led to the formation of a bearish engulfing candle as Wednesday’s candle body is wider than Tuesday’s candle body. A breakdown from today’s low could lead to a test of support at the 8 DMA (79.20), then the 13 DMA (78.55) and 77.90. If the market rallies above the high then a move towards resistance at 82.30 is possible.
For those interested I hold a weekly livestock webinar on Friday, May 26 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.
**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.