February Live Cattle:
After a solid recovery attempt from the October lows, February live cattle failed to punch through resistance at the September highs around $116.000. This failure has brought with it a heavy round of selling, which was punctuated on Friday with a near limit-down close. Friday's close pushed the February contract back below the 50- and 100-day moving averages at $112.95 and $112.80, respectively. The 200-day moving average sits just below the market at $110.75, which also lines up nicely with the area of consolidation in early November. We would look at that $110.00 to $111.00 area as a near-term target if bulls cannot turn trade higher early this week. CFTC data will be updated later Monday afternoon, but as of the last report on Nov. 3 funds still held a 16,068-contract net-long position. While this position is by no means large, there are still contracts to be liquidated, especially if COVID-19 related lockdowns become more intense.
January Feeder Cattle:
In similar fashion to live cattle, feeder cattle futures put together a nice rebound from the October lows, only to fail at the September highs around $140 to $142. There is a small gap on daily charts from $136.525 to $136.900 from Nov. 8-9 which could act as a near-term target should early week selling accelerate. January feeders pushed below the 100-day moving average on Friday at $138.50 with the 50- and 200-day moving averages still below spot prices. Momentum indicators have rolled over as one would expect, although most are not implying severe weakness in the days and weeks ahead. Running a Fibonacci retracement analysis from the $124.25 lows to the $141.50 highs puts the 50% retracement at $132.875. This also lines up with the area of consolidation in early November and should provide support on a further setback.
February Lean Hogs:
After rallying to 10-month highs in October, hog futures have turned decidedly lower and have a clear corrective phase unfolding. In fact, the initial leg lower from Oct. 16 to Nov. 2 quite clearly looks like wave A as part of a larger degree A-B-C corrective sequence. If that view proves accurate, it would mean the most recent sell-off from Nov. 6 to spot prices is wave C and could mean still lower prices ahead. Using a Fibonacci progression analysis, wave A's length snapped onto the $68.825 corrective high from Nov. 6 would imply a downside target of $61.100. Obviously, price would have to break the $64.275 corrective low from Nov. 2 first, but given the fact managed funds were holding 35,714 contracts on the last CFTC report, the ammunition would seem to be there. A bearish policy remains advised until price can recover above the $67.55 corrective high from Thursday at a minimum.
Tregg Cronin can be reached at email@example.com
Follow Tregg Cronin on Twitter @5thWave_tcronin
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.
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