Tuesday Morning Livestock Market Update - Futures May Take a Breather

GENERAL COMMENTS:

Tuesday is the last trading day for October live cattle with December taking over as the front-month Wednesday. The December contract moved slightly into the gap left after the Cattle on Feed report, but could not close the gap. Later contracts will need to see further strength to close their gaps. The optimism of higher cash this week and the recent strength may accomplish the task, at least in the December contract. There is no indication of cash price this week as trade did not develop and bids or offers were not posted. Boxed beef was higher with choice up $1.71 and select up $0.77. Feeder cattle have not rebounded as much as live cattle, making an interesting dynamic. Feeder cattle generally are the leaders for market direction. There is a hesitancy over how much strength there will be for cattle through the rest of the year.

Hogs continued the rise that began one week ago. The December contract moved right to the 50% retracement level from the recent high and low. This capped the strength Monday as sell orders may have been resting at that level. Stronger cash finally developed with the National Direct Afternoon Hog report showing a gain of $0.66. Pork cutouts were also higher with an increase of $1.46. There could be some contrary trading activity Tuesday as futures increased over the past week with cash and cutout weakness. Now that there is some strength, futures could see some selling pressure.

	BULL SIDE		BEAR SIDE
1)	Chart gaps remain above the live cattle market, which could provide further technical support as traders may push to fill those gaps.	1)	There may be sell orders resting at the close of the December chart gap as technical traders may take profits and become more aggressive sellers.
2)	Overall cattle supplies remain tight and will remain that way for a period. It will take time to rebuild the cattle herd.	2)	Packers will need to see more evidence of strong beef demand before they may become more aggressive in the cash market.
3)	Hogs traded higher in the cash market Monday with cutouts showing strength. This could support further buying interest from traders.	3)	Hog cutouts need to see more consistency of strength before packers will be more aggressive buyers.
4)	Hog futures have been overdone to the downside and are now finding a level of equilibrium. Once that is found, it could provide support to the market as traders may feel more confident moving forward.	4)	December hogs could not push above the 50% retracement level, which could cap the rally for the time being. Technical strength needs to be supported by fundamentals.