The February Lean Hogs contract opened higher, broke down to the low of the day at 70.775 and then rallied to the high of the day. It made the high at 72.60, just below resistance at 72.80 and pulled back settling near the open price at 71.55. This is a new high for the fledging break out, but it couldn’t hold onto the gains falling into the lower end of the 71.325 – 71.85 key area. It formed an outside day candlestick. It is neutral in my opinion as the candle resulted in a Doji indicating indecision. If settlement holds price can revisit the Thursday high. A break out above 7280 could lead to a test of resistance at the February high (the day it became lead contract) at 73.40. Trading below 71.325 could see price test support at 69.90. The Lean Hog index declined and is at 57.93 as of 12/30/2019. The Pork Cutout Index declined and is at 75.12 as of 12/31/2019.
The February Live Cattle opened higher and traded to the high of the day at 126.325. It was unable overtake resistance at 126.625 and pulled back and then slid past support at 125.80 to the low of the day at 124.55. This was a successful test of support at 124.30 as the market recovered and the remainder of the session to settle at 125.775, just below the key ley level at 125.80. It formed a Doji candlestick with a long shadow as the buyers came back in force. If price can get above the 125.80 – 126.625 resistance area, a test of resistance at 128.10 is possible. A failure from settlement could see price test support at 124.30 and then the rising 50 DMA now at 123.03. Cash saw some light trading at 193.00 – 198.00 on a dressed basis. It also traded some at 125.00 on a live basis. Boxed Beef cutouts were mixed on light to moderate demand and offerings. Choice cutouts declined 1.17 to 208.25 and select was up 0.59 to 202.63. The choice/ select spread narrowed to 5.62 and the load count was 118. Slaughter was estimated to be 122,000.
March Feeder Cattle took one on the chin and almost went down for the count. It opened higher and ticked to the high of the day at 144.75, just below resistance at 145.05. The market collapsed, blowing through support at 142.40 and the nearby 200 DMA at 142.16 on the way to the session low at 141.325. Price consolidated and then a late session surge took price past the 200 DMA to resistance at 143.50 and it settled just above it at 143.725. If price can hold settlement, a test of resistance at 144.25 and then 145.05 is possible. If it can take out resistance at 145.05, a recovery to resistance at 146.20 is possible. A failure from settlement could see price test support at 142.40 and the nearby 200 DMA at 142.16. Support then comes in at 140.775. The Feeder Cattle Index rose and is at 142.48 as of 12/31/2019.
Happy New Year. I hope you have a successful year in 2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, but due to the holiday season our next webinar will be on January 9th 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.