Walsh Trading Daily Insights
Commentary
October Lean Hogs gap opened higher, surged to a new high for the up move a t 60.95, then tumbled. It closed the gap making the low at 58.875 then rallied to settle at 59.825. Settlement was above the 200 DMA (59.29) which is positive but the candle formed a Doji which indicates indecision. Hogs must show strength on Tuesday and hold a re-test of the 200 DMA or we can see a pullback to support at 57.025, in my opinion. Settlement is at key level in my support / resistance numbers so this is once again pivotal in my opinion. Support is at the 200 DMA, 58.25 and then 57.025. If settlement holds a re-test of the Friday high is possible. Resistance is at 61.80 and then 63.325. Hogs are in a long-term downtrend but is building upon a short-term up-trend. The short-term moving averages are starting to flow higher which could lend support to any pullback and possibly provide buying opportunities. The cutouts and the Lean Hog Index remain firm after making their lows last month.
The Pork Cutout Index jumped and is at 74.43 as of 9/3/2020. The Lean Hog Index increased and is at 58.13 as of 9/2/2020.
Estimated Slaughter for Friday is 460,000 which is below last week’s 481,000 and above last year’s slaughter at 429,000. Estimated slaughter for Saturday is 119,000, lower than last week’s 269,000 and last year’s 358,000. The weekly slaughter is estimated at 2,484,000, lower than last week’s 2,657,000 and above last year’s holiday week slaughter at 2,217,000.
October Feeder Cattle broke down and traded to a new low for the down move. It traded down to 137.55 and recovered to settle at 138.50. It formed a Hammer candlestick and could be supportive to the market. If price can open strong and trade above the Friday high (138.975), a test of resistance at 140.775 is possible. The 50 DMA continues to rise and is now at 141.43. Resistance then comes in at 142.40 and 143.50. A failure from settlement could see the low revisited and then move towards lower support levels. Support is at 136.75, the rising 100 DMA (136.50), 135.60 and the 200 DMA (135.57) (makes this area another pivotal spot, in my opinion).
The Feeder Cattle Index increased and is at 140.20 as of 9/3/2020.
October Live Cattle consolidated, trading within Wednesday’s big range. It settled below the rising 50 DMA (105.05) at 104.45 and is near the lower part of the 104.85 – 104.20 support band. Price needs to reclaim the 50 DMA or a retest of the Wednesday low is possible. Support is at 104.20, 103.00 and then 100.275. Resistance is at 104.85, the 50DMA, 106.025 and there is strong resistance at the 200 DMA (106.52).
Boxed beef cutouts were lower with choice cutouts down 1.39 to 225.85 and select down 3.20 to 209.30. The choice/ select spread widened to 16.55 and the load count was 108.
Friday’s estimated slaughter is 115,000, which is below last week’s 116,000 and last year’s 118,000. Estimated slaughter for Saturday is 44,000, lower than last week’s 66,000 and last year’s 102,000. The weekly estimated slaughter is 633,000, lower than last week’s 654,000 and higher than last year’s holiday week slaughter at 571,000.
The USDA report LM_Ct131 states: Thus far Friday, trade was light on light to moderate demand in the Texas Panhandle. Compared to Thursday in the Texas Panhandle live purchases traded steady at 102.00. Trade was limited on light to moderate demand in all other feeding regions. Not enough purchases for an adequate market test. The latest established market in Kansas was on Thursday with live purchases at 103.00. The latest established live market in Nebraska was Thursday with a few live purchases at 102.00. Dressed purchases on Tuesday traded from 162.00-164.00, mostly from 163.00-164.00. The latest established dressed market in the Western Cornbelt was on Thursday at 162.00. The latest established live market in the Western Cornbelt was on Wednesday with a few purchases from 103.00-104.00.
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, September 10, 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.
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