The February Lean Hogs contract made an early attempt to rally past the Monday high as it traded up to 69.35 for the session high. The failure to hold on to the high resulted in a break down which sent price back down to support at 67.80, making the low just above it at 68.025. Once again, the skittish hog market reversed course and rallied to settle near the high at 69.225. If price can rally past the Tuesday high, a test of resistance at 69.90 and then the 13 DMA at 70.39 is possible. A failure from settlement could see price revisit support at 67.80 and then the rising 50 DMA now at 67.74. The 100 DMA is next at 67.08. The Lean Hog index rose and is at 59.19 as of 01/03/2019. The Pork Cutout Index down ticked and is at 74.11 as of 01/06/2019.
The February Live Cattle couldn’t take out the Monday high, making Tuesday’s high just below it at 127.25. It consolidated within Monday’s range, trading down to support at 125.80, making the low just below it at 125.775. It formed an inside candlestick. It settled at 126.525. Price still consolidating within the 127.9- – 123.30 trading range. It is again in the upper end of the range and needs to take out the high and then blow past resistance at 128.10 to get energy back in the market. Otherwise, it will likely stay within the trading range. A break out above 128.10 could see price approach resistance at the March 1, 2019 high at 130.45. A failure from settlement could see price test support at 125.80 and then 124.30. Cash trade was limited on very light demand in Kansas and the Western Cornbelt. It treaded at 124.00 and 125.00 on a live basis. Boxed Beef cutouts were mixed on moderate demand and heavy offerings. Choice cutouts dipped 0.09 to 209.56 and select was up 0.02 to 206.82. The choice/ select spread narrowed to 2.74 and the load count was 156. Slaughter was estimated to be 123,000.
March Feeder Cattle also failed to capitalize on Monday’s rally. It consolidated within Monday’s range and formed an inside candlestick. It traded down to support at 144.25, making the low at 144.05. It settled at 145.125. If price can hold above settlement then at test of resistance at 146.20 and then 147.30 is possible. If the bears panic a run to 148.40 is possible. If settlement fails, a re-test of support at 144.25 is probable. A failure from here could send price down to support at 143.50. The Feeder Cattle Index declined and is at 145.98 as of 01/06/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, and 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.
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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.