The April Lean Hogs contract wasn’t able to take advantage of Friday’s break out rally. Friday saw Hogs close the gap from the low on 1/30/20 at 65.825 and the 1/31/20 hi at 65.15. It traded to 66.85 which surpassed resistance at 66.55. It settled just below resistance at 66.25 on Friday. Monday’s trade saw price test Friday’s settlement and fail. It broke down and approached support at 64.80, making the low at 64.925. Settlement was just above the low at 65.075. If support at 64.80 fails, price can fall back into Thursday’s limit up range and test the declining 8 DMA at 63.77. Support then comes in at 63.325. If settlement holds a re-test of resistance at 66.55 and then the Friday high is possible. The Coronavirus continues to rage in China and is expanding its reach elsewhere causing continued worries about demand destruction. The virus is a serious threat as cases continue to mount and China has not been able to slow the spread of the disease. The Lean Hog index continued its decline and is at 59.57 as of 02/06/2020. The Pork Cutout Index once again collapsed and is at 66.73 as of 02/07/2020.
The April Live Cattle made its high on the open at 119.725 and then broke down and traded to the session low at 118.475. It settled nearby at 118.675. Settlement was below support at 119.15. A failure from settlement could see price test support at 117.80. Support then comes in at 116.55. If settlement holds a test of the Monday high is possible. Resistance then comes in at 120.70. Cash trade was at a standstill. Boxed Beef cutouts were lower on light to moderate demand and moderate to heavy offerings. Choice cutouts decreased 1.21 to 208.91 and select was down 0.19 to 203.70. The choice/ select spread narrowed to 5.21 and the load count was 99. Slaughter was estimated to be 119,000.
March Feeder Cattle opened lower and traded down to support at 134.25, making the low just above it at 134.375. It was able to recover and close in positive territory unlike Hogs and cattle. Settlement was at 135.70 just above the key level at 135.60. It settled just below the leveling 8 DMA at 136.05. A breakdown below settlement could see price re-test support at 134.25 and then 133.50. If settlement holds a re-test of resistance at 136.75 is possible. Resistance then comes in at 138.95. The Feeder Cattle Index declined and is at 140.63 as of 2/6/2020.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays and our next webinar will be on Thursday, February 13th 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.