Cattle Drop and Lean Hogs Pop

Barchart · 10/17 08:35

Live Cattle (December)

Cattle futures staged an inside day, trading within the previous day’s range. Support remains intact from 186.075-186.40. A failure here and against Tuesday’s low could open the door for additional long liquidation from Funds who have amassed a net long position of nearly 78k futures/options contracts, the largest net long since July (when the market peaked). We are in the camp that there is some near-term downside risk despite strong fundamentals. With that said, we don’t foresee any pullbacks being as severe as they were in March and August, at least for the December contract. The deferred contracts may come with more risk.

Resistance: 189.47-190.075, 191.47-191.62
Pivot: 187.675-188.00
Support: 186.075-186.40, 184.225-184.55


Seasonal Tendencies
Through the first half of October, live cattle have been close to on trend with historically price averages for the same period. Historically we’ve seen continued strength through the back half of the month, but there are some concerns that uncertainty around the election could impact money flow which could lead to some turbulence in commodities such as cattle.

From Season Algo

*Past performance is not necessarily indicative of future results.

Volatility Update
The CME CVOL index ticked lower yesterday as volatility remains relatively low, which may make options a good play for those who are looking to protect the downside while keeping the upside open.
 

From CME Group

Economic Data

This morning’s economic data came in better than expected with a beat in retails sales, and Philly Fed. Initial jobless claims were in line with expectations.

Daily Cattle and Beef Summary

Cutout values were firm yesterday with choice cuts 2.30 higher to 319.13 and select .28 higher to 292.37. The 5-area average price for live steers was reported at 187.00, steady with recent reports. Wednesday’s slaughter was reported at 125k head, in line with last week and last year. Week to date slaughter is at 370k, that’s 11k more than last week but 6k less than the same period last year.

Weekly Export Sales

Pushed back to Friday morning due to Monday’s holiday

Want our Full Report?

Subscribe to our daily Livestock Roundup for exclusive insights into Feeder Cattle, Live Cattle, and Lean Hogs. Get access to our proprietary trading levels and actionable market biases delivered straight to your inbox—every day.

Sign Up for Free Futures Market Research – Blue Line Futures

Lean Hogs (December)

We’ve been in the Bear camp for lean hogs but yesterday’s sharp reversal back to a new closing high for the move puts that bias at risk. The market closed right at the top end of our resistance pocket from 77.22-77.72. A breakout above this pocket could extend the rally towards 78.70-78.97. Above that is the contract high from April at 79.60.

Resistance: 77.22-77.72, 78.70-78.97*
Pivot: 75.25-76.00
Support: 73.85-74.07, 72.00-72.85*,


Seasonal Tendencies
Lean hogs have historically done well in the first half of October, but the back half tends to be more questionable. We’ve seen this December contract stage a few counter seasonal trends this year, so whether or not this year aligns with history is TBD.

*Past performance is not necessarily indicative of future results.

From Season Algo

Volatility Update
With prices at the upper end of the range and volatility at the lower end, those looking to protect price and keep the upside open may consider using options as a tool. To discuss specific strategies around your risk-profile, please reach out to the trade desk.
 

From CME Group

Futures trading involves substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Blue Line Futures is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that the NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. Therefore, carefully consider whether such trading is suitable for you considering your financial condition.
With Cyber-attacks on the rise, attacking firms in the healthcare, financial, energy and other state and global sectors, Blue Line Futures wants you to be safe! Blue Line Futures will never contact you via a third party application. Blue Line Futures employees use only firm authorized email addresses and phone numbers. If you are contacted by any person and want to confirm identity please reach out to us at info@bluelinefutures.com or call us at 312- 278-0500
Performance Disclaimer
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.


On the date of publication, Oliver Sloup did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.