The December Lean Hogs opened lower and broke down hard nearly going down limit. It traded just past the 67.80 support level making the low at 67.725. It bounced at the end of the session and settled at 68.15. Thursday’s low is below the low of the consolidation range we’ve been in for the past 6 trading sessions. If price fails to bounce back from today’s decline a continuation of the down trend is possible. A breakdown from the low could see price test support at 66.55 and the 50 DMA at 66.43. If this area can’t stop the selling a move towards support at 64.25 is possible. If price recovers and holds settlement a short-covering rally back into the consolidation range is possible. The Lean Hog index continues to rise and is at 63.94 as of 10/15/2019. The Pork Cutout Index continued its climb and is at 77.65 as of 10/16/2019.
December Live Cattle traded lower from the open but was able to make a higher low (113.10) than Wednesday’s low (112.65). It rested most of the session watching Hogs and Feeders get beat up then surged at the end of the day making a new high for the up move. The high was 114.425, and it is still below resistance at 114.65. It settled near the high at 114.375 and is above the key levels at 113.90 and the 200 DMA at 113.74. It formed another hanging man candlestick. This is a difficult area for cattle. Thus, the grinding nature of the trade, in my opinion. A failure form settlement could see price re-test support at 112.35. A break down from here could move toward a test of support at 110.80. Taking out the session high could see price test resistance at 114.65 and then 116.55. The cash market was saw some more trades in Iowa at 110.00 on a live basis and 175.00 and 178.00 traded on a dressed basis. Boxed beef cutouts were mixed with choice cutouts down 0.17 to 218.11 and select up 1.23 to 192.60 on moderate to good demand and moderate to heavy offerings. The choice/ select spread narrowed to 25.51 and the load count was 146. Slaughter was 111,000. There was an explosion at a Cargill beef packing plant in Dodge City that injured 2 employees and caused Cargill to close the plant for the day. It should be up and running on Friday. Cargill said it meet all of its commitments.
November Feeder Cattle took one on the chin today and collapsed. It broke down hard and traded down to support at the rising 21 DMA (142.61) and the 200 DMA at 142.43. The 142.40 support level is also nearby. It was able to recover from the knock down and take back some of its decline, settling at 144.325. This is just above the key level at 144.25. Holding settlement could see price revisit resistance at 145.05 and possibly 146.20. Resistance then comes in at 147.30 and 148.40. A failure from 144.25 could see price revisit the afore mention support levels. A break down from here could see the 140.775 level tested. The Feeder Cattle Index rose and is at 145.15 as of October 16th.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Friday, October 18th at 2:00 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.**
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.