They said the market could only go higher. They said there would never be another bad day. They said only fools would be caught short.
They said a lot of nonsense. Intoxicated feeder cattle bulls, that is.
Let no one in the room sound like a self-righteous teetotaler. As far as I can tell, the whole town got drunk. Given how August futures relentlessly climbed from 170 in early February to over 218.50 last week, the irresistible celebration was like a German beer garden on steroids.
But the wild party that once seemed unending has finally started to wind down this week as multiple rounds of limit losses in the feeder pit signal the equivalent of bar stools turned upside down.
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To be sure, there are no plans to turn the saloon into a church. Bullish arguments of historical short cattle numbers, outstanding feedlot profits, impressive beef demand, and lower-trending feed costs would still seem to have great long-term potential for fun and profit.
Yet prospects for a new bullish rave will have to unfold tomorrow, or the day after. For the moment, the last call's broken glassware is being swept into the trash and the lights are going down.
Because nothing moves higher forever, and even the most bullish news imaginable eventually reaches a market context within which it sounds flat and uninspiring.
As far as potential safety nets are concerned, I like to look at 40-day and 100-day moving averages. In the case of August feeders, these markers suggest better buying interest near 203.90 and 190.10.
Sure, I've give you a moment to catch your breath.
Of course, buying interest could easily resurface considerably above these levels (thanks to all the bullish fundamentals noted above). But it would probably be a mistake to necessarily assume that the midsummer market can make short shrift of damage control.
The bigger the bubble, the bigger the potential mess when it pops.
For more of John's commentary, visit http://feelofthemarket.com/…