August Lean Hogs opened lower and traded to the session low at 48.10. The market reversed course and surged closing some more of the 50.60 – 49.375 gap with the session high at 50.00. Of course, the rally couldn’t hold and it pulled back settling at 49.075. Hogs are in a downtrend in my opinion and the gap could be strong resistance. Support on Thursday is at 47.825, 46.30 and then 43.05. Resistance is at 49.35, 50.475 and then 51.80. The Pork Cutout Index ticked higher and is at 65.41 as of June 30, 2020. The Lean Hog Index up-ticked and is at 45.24 as of June 29, 2020. Estimated Slaughter for Wednesday is at 469,000. This is above last week’s slaughter of 468,000 and below last year’s slaughter at 478,000.
August Feeder Cattle traded to the session high early in the session at 133.95, then broke down and traded past support at 131.10 to the low at 130.775. It recovered and settled in positive territory at 133.075. It is still hanging out in the middle of its 138.80 – 128.325 trading range and now has to watch a short-covering rally in corn. If corn continues to rally will we see a return to the lower end of the trading range? Thursday has support at 132.075, 131.10 and then 129.65. Resistance is at 133.50, 134.25, 135.60 and then 136.75. The Feeder Cattle Index dipped and is at 129.13 as of 6/30/2020.
August Live Cattle was able to rebound on Wednesday settling in positive territory at 97.30. It formed an inside candle however as it traded within Tuesday’s range, continuing its consolidation. Settlement was above long-term resistance at the declining 100 DMA (96.93) which is positive for the market in my opinion. Bulls cannot afford a continued back and forth around the 100 DMA, they need to step on the gas and pull away from the moving average. Back and forth increases the likelihood of a failure and a retest of the low of the trading range, in my opinion. Support is at the 100 DMA, 96.10, the rising 50 DMA at 94.68, 94.30, trendline support at 93.975 and then 92.15. Resistance is at 98.125, 99.375 and then 100.275. Boxed beef cutouts were lower on Wednesday with choice cutouts down 1.59 to 205.38 and select down 1.47 to 198.43. The choice/ select spread narrowed to 6.95 and the load count was 193. Wednesday’s estimated slaughter is 121,000, above last week’s 120,000 and below last year’s slaughter of 122,000. This is a shortened kill week due to the July 4th holiday on Saturday. The USDA report LM_Ct131 states: So far for Wednesday in the Southern Plains negotiated cash trading and demand has been moderate. In the Texas Panhandle, compared to last week, live trades moved steady to 2.00 higher at 95.00. In Kansas, compared to the prior week, the bulk of live trades moved 2.00 lower at 95.00. Thus far for Wednesday in Nebraska negotiated cash trading has been slow on moderate demand. Live trades, compared to last week, moved steady to 1.00 higher from 95.00 to 96.00 and dressed trades, compared to the last reported market on Tuesday, moved steady to 1.00 lower from 154.00 to 155.00. So far for Wednesday in Colorado and Western Cornbelt negotiated cash trading has been very limited on very light demand. In Colorado a few live trades moved from 95.00 to 96.50. In the Western Cornbelt not enough trades for a market trend. The last live trade market was on Monday with trades from 96.00 to 97.00. The last dressed market was on Tuesday with trades from 152.00 to 155.00.
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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