Tuesday Morning Livestock Market Update - Cattle Futures May Bounce

GENERAL COMMENTS:

Selling in cattle erupted at the beginning of trading Monday with pressure gaining as prices fell. The cattle market might be in trouble, being unable to move back up and close the chart gaps technically while fundamentally seeing the potential for the slowing of demand. Boxed beef prices were lower with choice down $0.62 and select down $1.65. There is some optimism for higher cash this week, but with the pressure early on futures and the trend for lower boxed beef, steady cash may be a victory. Bids or offers have not yet been revealed. It will be an interesting rest of the week as the trade will be wary of next Friday's Cattle on Feed report.

Hogs held Monday but could not exceed the highs of Friday. A greater price increase may have been held back due to lower cash and cutouts Friday. That may change Tuesday as both cash and cutouts were higher Monday. However, with the strength of futures last week -- even when cash and cutouts were lower -- there could be contrary trade Tuesday as traders may trade the opposite of cash and cutouts. The National Direct Afternoon Hog report showed cash up $1.47. Cutouts jumped $4.33 with a rise in all cuts except for ribs. Bellies posted a strong gain of $14.86.

	BULL SIDE		BEAR SIDE
1)	Chart gaps were left at the opening in live cattle Monday which will likely be filled at some point.	1)	Cattle again failed to regain their previous losses, which makes traders less willing to buy into the market aggressively. The market will need to prove itself.
2)	Cash trading activity may hold out to the end of the week, which generally provides support to the market as packers will need to purchase cattle.	2)	The funds liquidating their long positions in both live cattle and feeder cattle leaves a bearish tone for the complex.
3)	Hogs may have a head-and-shoulders bottom formation which may give technical traders confidence to buy the market.	3)	Traders bought the weakness of cash hogs and cutouts last week. They may sell the strength this week.
4)	Strong cutouts Monday could indicate demand is improving. This, in turn, may cause packers to be more aggressive with their purchases.	4)	There may be a limit to upside price potential into the end of the year as demand uncertainty still exists once the new year rolls around and Prop 12 is fully implemented.