Technically Speaking

Mixed Trends in Livestock

February lean hogs look prime for a retest of the October lows after taking out November lows last week. (DTN ProphetX chart)

Fat cattle prices have been a rangebound affair for the last 30 to 45 days, testing both ends of that range multiple times. Even though prices have been consolidative, it does not mean there has been any shortage of volatility. That said, navigating this rangebound affair so as to not get chopped up inside it is no small task. Unfortunately, our preferred measure of momentum is not offering any clues as to what side of the fence to play the live cattle market. A host of moving averages from 5- to 200-day also aren't offering much help, other than to say the long-term trends are still higher. Therefore, we can simply identify some objective risk parameters from which to gauge directional exposure. To the upside, we would want to see trade above the Dec. 5 corrective high at $156.375 and to the downside, trade below the Dec. 7 corrective low at $152.75. Trade above or below either of those levels would lead us to more definitively get behind the bulls or the bears. Otherwise, traders must be prepared for more aimless, whipsaw trade until longer-term objectives can be surmounted.


Unlike live cattle, feeder cattle are much more plainly showing their hand with trendy, impulsive behavior higher. With last week's rally, January feeders are now trading above the 50-, 100- and 200-day moving averages on their way to the highest print since Sept. 20. This impulsive trade higher has momentum indicators pointed up and not at all suggesting any sort of bearish divergence with price. With Friday's rally, January feeders pushed through the 61.8% retracement of the entire Aug. 18 to Oct. 10 selloff near $184.50. If feeders can manage strength through that retracement level this week, and do so without a failure in momentum, it will open up additional upside to the $188.00 area. These issues considered, a bullish policy in feeders remains advised with trade below the Dec. 6 corrective low at $180.30 needed to threaten this count.


While cattle futures are in either a consolidation phase, or an uptrend, lean hogs are definitely in a downtrend. Last week's trade was especially troublesome for hogs as Thursday's price action took out the Nov. 30 corrective low at $83.725, opening up downside to the October lows in the upper 70s. The Nov. 30 corrective low also lined up quite nicely with the 50% retracement of the 10/4-10/26 rally around $84.15. The 61.8% retracement still exists around $82.30, but we would want to see a bullish divergence by some momentum indicator to give us confidence price was actually going to hold a derived indicator like a Fib retracement. These issues considered, a bearish policy remains advised until or unless hog futures can recover back above an area of technical merit like that of Wednesday's high at $87.75. Otherwise, continued downside is expected straightaway with a retest of the October lows not out of the cards.


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.

Tregg Cronin can be reached at

Follow him on Twitter @5thWave_tcronin


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