The nearly steady uptrend in live cattle futures since early September does not show signs of slowing down. Demand remains strong. Buyers remain aggressive. Technically, the market is overbought, but it was for basically the entire month of October. Selling into an overbought market has not been the right thing to do. Strong cash is supplying plenty of support with another significant jump on Friday. Cash does not trade on Mondays and there may not even be any showlists distributed as buyers and sellers wait. Friday's Commitment of Traders report showed funds long 60,462 contracts, an increase of 4,618 from the previous week. They hold 43,162 short positions, which is a decrease of 3,650 contracts for the week.
Hogs just cannot seem to get a break from the bearishness overhanging the complex. December futures appear to be settling into a sideways trading pattern. Support is near Friday's low and needs to hold. A significant gap remains below the market on the price charts, but so far price has been able to avoid moving there. The strong possibility of the signing of phase one of the trade deal with China keeps the market holding out hope for export demand to increase. However, hog numbers are plentiful with heavier weights providing more tonnage to the market.
| BULL SIDE | BEAR SIDE | ||
| 1) |
The trend is your friend and the strength exhibited in the cattle complex has been surprising. This has kept traders confidently buying futures aggressively.
| 1) |
The cattle complex has been overbought technically for over a month with no price retracement. Resistance may be seen soon with a price correction inevitable.
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| 2) |
Strong support in cutouts cannot be argued with. Demand is strong with packers needing to step up purchases in order to meet that demand. Consumer price resistance has yet to be seen.
| 2) |
Cattle weights have been climbing slowly and, even with strong demand and aggressive packer purchasing, there seems to be plenty of supply available. This could be bearish if demand slows.
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| 3) |
Technically, December hogs may be settling into a sideways trading pattern as the market absorbs heavy supply. This could build strong support.
| 3) |
Large charts gaps remain below current prices in December through July contracts. Chart gaps generally are filled at some point before the contract is settled.
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| 4) |
Lower pork prices should increase demand in light of significantly higher beef prices. Any positive indication of a partial trading agreement with China could send futures significantly higher.
| 4) |
International demand for pork has not improved as much as expected due to the impact of African swine fever. Traders may remain bearish unless the market proves otherwise.
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| #completeherdhealth |
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