Commentary
December Lean Hogs started election day on a positive note, gap opening higher and reaching the high of the day at 66.80. This was just above trendline resistance at 66.75 and above the key level at 66.55. This contained the hogs and price fell down to the lows at 65.15. It settled near the low at 65.40. December Hogs are consolidating with the high at 66.975 and the low at 64.10. It has formed a ledge and if price fails below the low, we could see price break down to support at 63.325. The rising 50 DMA is also supporting the market at 63.675. Support then comes in at 61.80. Trendline resistance is at 66.70 for Wednesday and if price can break through here, we could see resistance at 67.80 revisited.
The Pork Cutout Index continued its fall and is at 85.84 as of 11/2/2020.
The Lean Hog Index decreased and is at 73.48 as of 10/30/2020.
Estimated Slaughter for Tuesday is 493,000 which is above last week’s 492,000 and last year’s 490,000. Slaughter for the week (so far) is estimated to be 986,000 which is above last week’s 979,000 and last year’s 982,000.
January Feeder Cattle has spent the past three trading sessions doing battle with the 200 DMA. It is declining and is at 134.075. Each day has brushed past the 200 DMA but hasn’t been able to get traders excited enough to power past this strong resistance level. Today’s trade actually surrendered to it. It opened above it and traded to the high at 134.425. It didn’t like being up there as the 200 DMA and trendline resistance at 134.725 proved to be too daunting for potential bulls. Price broke down and traded to the session low at 132.70. It settled near the low at 133.175. Today’s price action essentially was a consolidation day as it traded within yesterday’s range. So, we have a lot of potential influencers for Feeder Cattle. The inside candle, the 200 DMA and the trendline are potential dynamite. The 200 DMA is strong resistance. The inside candle has the potential to lead to a volatile trading session and the trendline is the potential buy trigger for a bullish Wolf Wave Pattern. The Trendline comes in at 134.725 on Wednesday. This could be your key to trade for Wednesday’s session. A break out above here could see a rally that could lead to a price objective at 148.00 for the Wolf Wave. A breakdown below the low could see price test support at 131.10. Support then comes in at 129.65, 128.875, 127.575 and then 125.90. Resistance is at 135.60, 136.75 and then 138.95.
The Feeder Cattle Index surged and is at 138.03 as of 11/2/2020.
December Live Cattle has spent the last three sessions consolidating after Thursday’s big breakout session. The candle stopped just below the 50 and 21 DMA’s. The 21 DMA was just higher than the 50 DMA and it has now crossed below it creating a bearish scenario. Price however has been hanging out nearby and a sharp rally could turn the 21 DMA higher. The 50 DMA is at 108.50 and the 21 DMA is at 108.075. So, it wouldn’t be that difficult to turn the tide, in my opinion. Price is also consolidating between 108.65 and 107.30. A break out above 108.65 could see price test resistance at 109.60 and then 110.80. 107.30 must hold or price could revisit support at 106.025. The rising 100 DMA is nearby at 105.925. This area should be strong support. The Presidential election and the Wuhan virus have been spooking the markets as President Trump would keep the economy open and a Biden win would shut down the economy as he predicts a dark winter due to the Wuhan virus. We may not know the winner on Wednesday and potential lockdowns would not be very good for the livestock markets and demand, in my opinion. Any delay in naming the winner could limit markets and keep them in a range until we have a good idea of who is the winner. We’ll see…
Boxed beef cutouts were higher with choice cutouts up 0.79 to 209.44 and select up 2.83 to 195.45. The choice/ select spread narrowed to 13.99 and the load count was 151.
Tuesday’s estimated slaughter is 121,000, which is above last week’s 117,000 and last year’s 120,000. The weekly total (so far) is estimated to be 240,000, which is above last week’s 232,000 and last year’s 236,000.
The USDA report LM_Ct131 states: So far for Tuesday negotiated cash trading has been at a standstill in the Southern Plains and Nebraska. In the Western Cornbelt negotiated cash trading has been mostly inactive on light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 106.00, on light test. For the prior week in Nebraska live purchases traded from 103.00- 105.00 and dressed purchases, on a very light test, traded from 158.00-163.00. For the previous week in the Western Cornbelt live purchases traded from 101.00-103.00 and dressed purchases, on a very light test, traded from 158.00-165.00. Live cattle has been at a standstill (so far) and dressed has minimal trades at 158.00 and 164.00.
Trade Suggestion(s)
Hogs – Buy the June 100 call and sell the June 110/100 put spread for negative 860 or better.
Risk/Reward
Max risk is $560.00 per contract plus commissions and fees.
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, November 5, 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
888.391.7894
Fax: 312.256.0109
www.walshtrading.com
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