The October Live Cattle contract broke down and made another test of the 104.875 support level on Wednesday, August 30, 2017. It made the session low at 104.95 just above the support level. The October contract grinded higher off the low and ended the trading session at 106.225, just above the 106.20 resistance level. The session resulted in a hammer candlestick formation and a rally from the 106.45 high could lead to a test of resistance at 107.60 and the 108.675. Support remains at 104.875 and 103.00. Today’s cash market saw the fedcattleexchange auction take pace with 1777 head for sale. Live sales took place at 105.00 and 105.25. There were sales for dressed at 166.00. The negotiated cash market saw some trading at 105.00 for live and 165.00 – 166.00 for dressed on Wednesday. Wednesday afternoon boxed beef cutout values were lower on Choice and higher on Select on light to moderate demand and light offerings. Choice was down 0.05 at 191.72 and Select up 0.33 to 191.12 on 137 loads. The choice/ select spread narrowed to 2.88. The estimated cattle slaughter for Wednesday was reported at 116,000.
The October Feeder Cattle traded down to test the 8 (142.70) and 13 (142.65) DMAs, making its low at 141.90. Support held and the October Feeders rallied to make new highs at the end of the trading session. It traded up to 144.35, just above the 143.50 resistance level and above the 21 DMA (144.05). It ended the day at 144.25, also ending up in a hammer candlestick formation. A rally off the high could lead to a test of resistance at 146.20. The 50 DMA is just above at 146.575. A breakdown below 143.50 could see a retest of the short-term moving averages and then support at 140.75. The 8 has crossed above the 13 DMA on Wednesday and could provide fuel to test resistance.
The October Lean Hogs contract traded within Tuesday’s trading range, forming an inside candle. The high is 61.70 and the low is 60.15. A rally above the high and the nearby 61.80 resistance level, could lead to a test of resistance at 63.35 and 64.90. A breakdown through the low could see a test of support at 58.10. Pork belly prices stabilized, as it was down 0.32 to 127.58. 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.