The February Lean Hogs contract consolidated within Tuesday’s trading range forming an inside candlestick. The Hog market yawned Wednesday as the Phase 1 trade deal was signed by President Trump and Chinese Vice Premier Liu. With the details of the deal unknown, traders sat on the sidelines and the price action suffered. The range was 68.05 high to the 66.775 low. Settlement was 67.875. If price can break out above the high, a test of resistance at 68.75 is possible. Resistance then comes in at the declining 21 DMA at 69.54. If price fails from settlement a test of support at 66.55 is possible. The Lean Hog index was virtually unchanged and is at 59.00 as of 01/13/2019. The Pork Cutout Index increased and is at 73.1936 as of 01/14/2019.
The February Live Cattle contract continued its lackluster trade. It traded down to 126.075 and made its high at 127.225. Settlement was at 126.60. It formed a spinning top candlestick showing indecision in a consolidating market. Settlement was right next to the key level at 126.625. If price can hold settlement, a re-test of the Friday high is possible and then resistance just above it at 128.10. 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 mostly inactive on light demand in all feeding regions. It traded at 124.00 – 124.25 on the fedcattleexchange.com auction on a live basis. Dressed purchases took place at 198.00. Boxed Beef cutouts were lower on light to moderate demand and moderate to heavy offerings. Choice cutouts decreased 0.23 to 212.53 and select was down 0.63 to 209.67. The choice/ select spread widened to 2.86 and the load count was 163. Slaughter was estimated to be a healthy122,000.
March Feeder Cattle traded down to support at 144.25, making the low just below it at 144.20. It traded up to resistance at 146.20, making the high just below it at 146.15. It settled at 145.175, just above the key level at 145.05. If resistance is overtaken at 146.20, a test of resistance at 147.30 and then the 147.775 is possible. A failure from 145.05 could see price re-visit support at144.25. Support then comes in at 143.50. The Feeder Cattle Index hasn’t updated as I write my article and is at 146.51 as of 01/13/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays, and our next webinar will be on January 16th 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.