The October Live Cattle contract rallied to trendline resistance on Monday, August 28, 2017, trading up to 109.75, just below the trendline at 109.775. It couldn’t sustain the rally and pulled back below the 21 DMA (109.05) and the 108.675 support level, ending the day at 108.55. It formed a shooting star candle for the second day in a row. If the October contract trades below the Monday low (107.60), a test support at 107.05 and 106.00 is possible. Getting above 108.675 could see a a test of the trendline, now at 109.525 and resistance at 110.80. The negotiated cash market saw some trading at 106.00 – 107.00 for live and 168.00 – 170.00 for dressed on Monday. Some of the sales were for 15 – 30 day delivery. Monsday afternoon boxed beef cutout values were higher on Choice and Select on moderate demand and moderate to heavy offerings. Choice was up 0.18 at 191.50 and Select up 0.32 to 188.62 on 130 loads. The choice/ select spread narrowed to 2.88. The estimated cattle slaughter for Monday was reported at 116,000.
The October Feeder Cattle opened higher and traded up to the 50 (146.625) and 100 (147.575) DMAs. It reached a high of 147.25 before pulling back and ending the session at 146.475, just below the 50 DMA. Resistance is at the 50 and 100 DMAs. Breaking out above the 100 DMA could see a test of resistance at 149.975. The 21 DMA should provide support at 144.475 and a breakdown below it could see a test of the 143.50 support level.
The October Lean Hogs contract broke down to a new low at 61.575. It ended below the 61.80 support level and continued weakness could lead to a test of the 58.10 support level. Resistance is at 63.35 and 64.90. Pork belly prices continued to decline, as it was down 6.21 to 137.17. Pork Belly prices have been a key driver for the Lean Hogs and a continued break down could lead to a bigger decline in the futures market.
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Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.