The October Live Cattle contract rallied to the high (107.475) of the day in the first 10 minutes of trading on Thursday, August 31, 2017. It tested and failed to overtake the 107.60 resistance level and reversed course and broke down to the low (104.20) of the day by mid-morning. This is below the 104.875 support level, making a new low for the down move in the process. Support held and the October contract retraced half way back (105.90) to the high. A retest of the 104.875 support level held (low 104.925) and it ended the day at 105.525). It resulted in an outside day candle with a small body. The session resulted in a hammer candlestick formation and a rally off the 106.125 Thursday open could lead to a re-test of resistance at 107.60 and then 108.675. Breaking down below 105.925 could see a revisit of support at 104.875 and then 103.00. The negotiated cash market saw some trading at 105.00 for live cattle. Thursday afternoon boxed beef cutout values were higher on Choice and Select on light to moderate demand and offerings. Choice was up 0.19 at 191.91 and Select up 0.22 to 191.34 on 115 loads. The choice/ select spread narrowed to .57. The estimated cattle slaughter for Wednesday was reported at 116,000.
The October Feeder Cattle rallied on the open to the high (145.95) of the day, failing to overtake the 146.20 resistance level. The failure at resistance led to a test of support at the rising 8 (143.225) and 13 (142.70) DMAs. It made the low of the day at 142.325, just below support and ended the day just above the 8 DMA at 143.30. Friday will have a confluence of the short-term moving averages, the 21 DMA (143.675) and the 143.50 support / resistance level. A rally from this area could lead to a re-test of resistance at 146.20. The 50 DMA is just above at 146.55. A breakdown below 143.50 could see a retest of the Wednesday low (141.90) and then support at 140.75.
The October Lean Hogs contract broke out above the Wednesday inside candle high and tested the 8 DMA (62.30), reaching the session high at 62.60. It failed here and traded down to the low of the day at 61.275 and ended the day at 61.35. It resulted in a shooting star candle formation and a break down below the Thursday low could lead to a test of support at 60.25 (TL) and the Tuesday low (59.825). Support then comes in at 58.10. A rally above the high could lead to a test of resistance at 63.35 and 64.90. Pork belly prices broke down again, as it was down 1.30 to 126.28. 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.