Walsh Trading Daily Insights
Commentary
June Lean Hogs soared on Friday, gap opening higher and continuing upwards to go limit up for the session and it also settled up limit at 62.70. The rally took out the bearish formation created by the price action from Monday to Wednesday. This is the highest hogs have been since gap opening lower on March 30th at 63.25. The limit move expands limits for Monday trade to 5.5 handles. It also is just below the gap created by that weaker opening high on March 30 and the March 29 low at 64.25. That gap is resistance and there is longer term resistance on the continuous chart at the 100 DMA at 67.03 and the 200 DMA at 68.82, in my opinion. Both are sloping downward so they will be moving closer to price as we go forward next week. Support is at the gap created by Friday’s low at 59.95 and Thursday’s high at 59.25. Slaughter levels remain low but improving from earlier in the week. Thursday’s slaughter was revised down to 283,000 from 288,000 but is still way above the Wednesday slaughter at 266,000. Friday’s slaughter is estimated at 280,000 and Saturday slaughter is expected to be 135,000. This will bring the weekly slaughter to an estimated 1,545,000. This is way lower than last week’s 1,986,000 and last year’s 2,366,000. The Pork Cutout Index continues to surge and is at 87.56 as of 4/30/2020. The Lean Hog Index is also rising and it jumped to 54.70 as of 4/29/2020. Cattle markets were strong early in the session with the June Live Cattle contract trading limit up and then erasing most of the rally only to rally at the end of the session to settle at 87.25 and then rally after settlement another 0.90 to end the day at 88.15. It is nice to see buyers coming in at the end of the day instead of a selling taking place. The limit move took price to the upper part of the 89.25 -80.275 trading range. Estimated slaughter on Friday dipped from Thursday’s 80,000 to 77,000 and Saturday’s slaughter is expected to be 47,000. This will bring the weekly estimated slaughter to a low 425,000 head, down from last week’s 465,000 and last year’s 673,000. Boxed Beef Cutouts continued its record climb, as choice cutouts increased 9.89 to 377.45 and select rose 6.97 to 357.13. The choice/ select spread increased to 20.32 and the load count was 83. August Feeder Cattle also rallied early in its session but unlike Hogs and Cattle it failed to sustain the rally and settled in the lower end of its trading range. The rally took price up to the high of its 131.225 – 123.475 trading range, making the Friday high just below it at 131.00. The settlement at 127.65 keeps Feeders in the middle of this range. The Feeder Cattle Index rose and is at 119.39 as of 4/30/2020.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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