Technically Speaking

Vaccines Inject Optimism Into Markets

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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February live cattle closed back above its 100-day average Friday and slightly above the upper boundary of a triangle formation, a bullish response to progress being made in the distribution of vaccines across the U.S. (DTN ProphetX chart).

Live Cattle: February live cattle closed up $1.60 last week, ending at $114.85 Friday, above its 100-day average and slightly above the upper boundary of a triangle pattern prices have been trading in since September. The global pandemic was especially bearish on cattle prices in 2020 and a lingering concern has been that processing plants may struggle to stay open as new infections are on the rise. Packers have been cautious buyers lately and have kept cash cattle prices depressed. Friday's higher close in the February contract is a hopeful sign that bearish concerns are starting to ease after the first week of immunizations took place in the U.S. Technically speaking, a close above the September high of $116.62 would confirm the bullish breakout that may have started Friday.

RBOB Gasoline: Somewhat like cattle, reformulated gasoline prices took a big hit from the global pandemic in early 2020 and have been slow to rebound. February RBOB gasoline fell to a 5-month low in late October as U.S. coronavirus infections and deaths were on the rise again. Since dipping below 98 cents a gallon on Nov. 2, prices have regained strength with support from the anticipation of vaccines coming to market. February RBOB gasoline closed up 7.73 cents last week to finish at $1.3910, its highest weekly close in nearly 10 months with the distribution of vaccines in the U.S. providing economic optimism for 2021. Technically, February gasoline prices may have difficulty trading above $1.40 a gallon as that is the old level of support that was broken in late February.

Corn: In 2018-19, ethanol production accounted for 38% of corn demand; but like gasoline, ethanol demand was hit by the global pandemic in 2020 and production remains lower than pre-coronavirus levels. Corn prices, however, are showing no hint of bearish regret as exports have taken up the baton in late 2020 and pushed corn prices to new 1-year highs. March corn closed up 14 cents last week at $4.37 1/2, near its contract high and continuing to look bullish from a technical point of view. March corn prices have been in such a strong uptrend that prices have held above their 30-day average since mid-August. The contract high of $4.39 1/2 may offer some resistance, but there is a larger challenge waiting at $4.76, the high of the March contract in 2019. So far, the trend in corn remains up.

Todd Hultman can be reached at Todd.Hultman@dtn.com

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.

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