Technically Speaking

Monthly Analysis: Livestock Markets

Darin Newsom
By  Darin Newsom , DTN Senior Analyst
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Source: DTN ProphetX

Live Cattle: The February contract closed at $124.975, down $0.65 on the monthly chart. The monthly chart continues to show a major (long-term) 5-wave uptrend. Wave 3 looks to be well under way with the rally seen off the August Wave 2 low of $104.20. Wave 3 is projected to peak above the Wave 1 high of $134.55 from May 2017. A potential target price is $143.475, the 61.8% retracement level of the previous downtrend from $172.75 (October 2014) through the low of $96.10 (October 2016). Monthly stochastics remain bullish below the overbought level of 80%.

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Feeder Cattle: The January contract closed at $15.175, down $5.40 on the monthly chart. Despite the sharp sell-off seen in November the market remains in a major (long-term) 5-wave uptrend with the current move looking like Wave 5. If that's the case, Waves 1 and 2 were small between October 2016 and February 2017. Monthly stochastics are nearing the overbought level of 80% indicating this could be the final wave of the uptrend. Initial resistance is at $164.725, a price that marks the 38.2% retracement level of the previous downtrend from $245.75 (October 2014) through the October 2016 low of $114.65. The May 2017 high of $163.50 still looks to be the peak of Wave 3.

Lean Hogs: The February contract closed at $69.775, up $1.775 on the monthly chart. The market looks set to resume its major (long-term) uptrend after the futures market posted a bullish outside month during November. However, much of this was due to a stronger than normal spread ($5.50) between the December and February futures as the latter became the more active contract and registered on the monthly chart. Therefore, the market needs to confirm November's bullish signal before projections can be made regarding upside targets.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.09 3/4, up 6 1/2 cents for the month. The NCI.X posted a bullish outside month during November, indicating the market could start to build bullish momentum. For now, the major (long-term) trend remains down given the series of lower highs (July 2015, June 2016, and July 2017) and lower lows (October 2014 and August 2016). The 4-month high could be out of reach for December up at $3.32.

Soybean meal: The more active January contract closed at $326.50, up $14.70 on the continuous monthly chart. The market is nearing a turn to a major (long-term) uptrend, a move that could be confirmed by a new 4-month high above the November peak of $331.90. Monthly stochastics are growing more bullish, indicating the stronger likelihood of a bullish breakout. If so initial resistance remains up at $367.00.

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