Walsh Trading Daily Insights
December Lean Hogs took Monday’s bullish outside candlestick and ran with it early in the trading session. It gapped opened higher and raced to the session high at 69.65. This is just below resistance at 69.80 and it proved to be too tough a challenge for Lean Hogs. Price collapsed from here and closed the opening gap as it traded to the session low at 67.425. Unfortunately, it settled near the low at 67.65. This price action puts the December contract in a weak position, in my opinion. The Tuesday session created a shooting star candlestick formation. If price falls below the Tuesday low, we could see price re-test the Monday low (65.30). Support is at the trendline (66.90), 66.55, the rising 21 DMA (66.39) and then 64.80. Resistance is at 67.80, 68.75 and then 69.80.
The Pork Cutout Index dropped and is at 95.82 as of 10/26/2020.
The Lean Hog Index decreased and is at 78.17 as of 10/23/2020.
Estimated Slaughter for Tuesday is 492,000 which is above last week’s 488,000 and even with last year’s slaughter. Slaughter for the week (so far) is 979,000 which is above last week’s 965,000 and below last year’s 983,000.
January Feeder Cattle broke out of its consolidation range on Tuesday. It opened strong, made the session low (126.95) and then raced to the session high at 129.45. It then spent the remainder of the day consolidating between the high and 128.225. It settled in the upper part of the session at 128.425. The high was just below resistance at 129.65 and settlement was below resistance at 128.875. The rally took price near the high of the break down candle (129.75) on October 19. You could say with the pullback and settlement below resistance that we just extended the trading range to the October 19 high. The low of the trading range is 124.25 from October 20. Support is at 127.575, 125.90 and then the October 20low. Resistance is at 128.875, 129.65 and then 131.10.
The Feeder Cattle Index down ticked and is at 133.64 as of 10/26/2020.
December Live Cattle opened strong and rallied to the session high at 105.35. Price was stopped in its tracks by resistance at the 100 DMA at 105.37. The fear of this level turned price around and took it down to the 200 DMA at 103.53. The low for the day was 103.525. It inched higher and settlement was at 104.05. Settlement was below the 104.20 resistance level keeping stress on the market. If we open with weakness on Wednesday a test of support is at 103.00 is possible. Support then comes in at 101.625 and then 100.275. Resistance is at 104.20 – 104.85, the 100 DMA (105.37), and then 106.025. Cash has been quiet as producers and packers are watching futures and hoping for a move in their favor. Cutouts have been unseasonably weak but the load count has been high, so retailers must be liking the price level.
Boxed beef cutouts were mixed with choice cutouts down 1.13 to 206.70 and select up 0.18 to 188.67. The choice/ select spread narrowed to 18.03 and the load count was 175.
Tuesday’s estimated slaughter is 117,000, which is below last week’s 121,000 and above last year’s 113,000.
The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading in Nebraska and the Texas Panhandle has been mostly inactive on very light demand. In Kansas and the Western Cornbelt negotiated cash trading has been at a standstill. Not enough purchases in any region for a full market trend. Last week in the Southern Plains live purchases traded at 106.00. Last week in Nebraska live purchases traded at 105.00 and dressed purchases from 162.00-166.00. In the Western Cornbelt last week, live purchases traded from 103.00-105.00 and dressed purchases from 163.00-165.00.
Hogs – Buy the June 100 call and sell the June 110/100 put spread for negative 860.
Max risk is $560.00 per contract plus commissions and fees.
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, October 29, 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.**
Senior Market Strategist
Walsh Trading, Inc.
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