The August Live Cattle gap opened (120.35) higher on Wednesday, May 31, 2017, reversed lower and closed the gap (yesterday’s high 120.10) trading to the low for the day at 119.875, then rallied the rest of the day. It reached the high at the end of the trading session, trading up to 121.90. The fedcattleechange auction, which is becoming a good barometer for how cash will trade for the week, was steady with last week’s auction. Last week’s auction saw trades between $131.00 and $`133.00. This week’s auction traded between $131.25 and 132.50. It traded at $128.00 to $129.00 for 17 to 30 day delivery. There were 2,067 head for sale and 1,257 sold. Boxed beef cutout values were up $0 .29 to $245.54 for choice and down $1.27 to $218.18 for select. There was light to moderate demand and heavy offerings on 175 loads. The choice/ select spread is at 27.36. Estimated slaughter for Tuesday came in at 116,000, more than last week’s 115,000 and above last year’s 113,000. August Live Cattle ended the session (121.85) above the 8 DMA (120.875) and the 13 DMA (121.525). Continued strength could see resistance tested at 122.775 and the 21 DMA at 123.725. Support is at the short –term moving averages and 120.10.
The August Feeder Cattle contract gap opened (150.375) higher from Tuesday’s high (150.25), broke down and closed the gap, trading past 149.975 support to 149.50. Support held and Feeder Cattle rallied the remainder of the day, reaching its high (153.15) near the end of the trading session. It is above the moving averages I watch and that could be bullish. It is also above the 38.2% retracement level (151.85) of the May 4th high (163.50) to the May 11th low (144.65). If Feeder Cattle can remain above this level on Thursday a test of resistance at the 50% retracement level (154.075) and then 155.10 is possible. The 61.8% retracement level is at 156.29. Support is at the 38.2% retracement level and then 149.975.
The July Lean Hogs also rallied on Wednesday blowing past the 82.375 resistance level and trading close to the next resistance level (83.80), making the high at 83.35. If Lean Hogs can break out above the 83.80 resistance level, a test of resistance at 86.275 is possible. If it pulls back from the Wednesday high, a test of support at 82.375 is possible. A breakdown from here could see a test of support at the 8 DMA (80.75).
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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.