Walsh Trading Daily Insights
Commentary
October Lean Hogs consolidated once again. It traded within Friday’s range forming an inside candlestick. (Friday also formed an inside candlestick – trading within Thursday’s range.) So… Thursday’s breakout move has failed to generate any excitement in the Hog market we are trading within resistance at 56.10 and support at 53.825. It settled for the second day in arow in the lower part of its trading range. Settlement was at 54.60. There is a gap from last Wednesday’s high (52.825) and Thursday’s low (53.55) which could provide support. A break-down from the Monday low (54.25) could see the gap tested. Support is at 53.825, the gap, the 100 DMA (52.71) and then 51.80. If settlement holds, a retest of resistance at 56.10 is possible. Resistance comes in at 54.775, 55.625 and then 56.10. Hogs are in a long-term downtrend but is attempting to build upon a short-term up-trend. Cutouts and the Lean Hog Index remain firm after making their lows last month.
The Pork Cutout Index dipped and is at 74.59 as of 8/21/2020. The Lean Hog Index rose and is at 55.51 as of 8/2/2020.
Estimated Slaughter for Monday is 480,000 which is even with last week and above last year’s slaughter at 476,000.
October Feeder Cattle gap opened lower on a bearish cattle-on-feed report and broke down past support at 142.40 to the low at 141.975. It was able to recover a bit off the low and it settled above support at 142.85. The gap created is from the Friday low at 144.875 to the Monday high at 144.35. A breakdown below support could see price test the 140.775 support level. Support then comes in at the upward sloping 50 DMA at 140.04 and then 138.95. Resistance is at 143.50, 144.25, the gap and then 146.10. Feeder Cattle is in an uptrend, in my opinion. The Feeder Cattle Index rose and is at 144.04 as of 8/21/2020.
October Live Cattle also felt the pain of the bearish cattle-on-feed report gap opening lower and trading down to support at the 200 DMA (107.24) making the low at 107.225. The market recovered and settlement was at 107.925. The gap is from Friday’s low at 108.375 to the Monday high at 108.05. The range was narrow and the 200 DMA will hopefully be strong support. The gap will present a problem and resistance is nearby at 10865. Futures could meander until we see a cash trade. Resistance is at the gap, 108.65 and 109.60. Support is at 107.30, the 200 DMA and then 106.025.
Boxed beef cutouts were higher with choice cutouts up 1.53 to 227.47 and select up 2.26 to 211.25. The choice/ select spread narrowed to 16.22 and the load count was 112.
Mondays estimated slaughter is 117,000, above last week’s 112,000 and even with last year.
The USDA report LM_Ct131 states: So far for Monday negotiated cash trading has been at a standstill in all major feeding regions. Last week in the Southern Plains live purchases moved at 106.00. For the prior week in the Northern Plains live purchases moved at 106.50 and, in Nebraska, dressed purchases moved at 169.00. For the previous week in the Western Cornbelt live purchases moved from 106.00 to 109.00 and dressed purchases moved at 169.00.
Trade Suggestion(s)
Risk/Reward
Futures N/A
Options N/A
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, August 27, 2020 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
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