Tuesday Morning Livestock Market Update - Choppy Trade Expected

GENERAL COMMENTS:

The strange aspect of live cattle is there had been a large price decline, but the Commitments of Traders report showed funds increasing their net-long positions by 325 contracts, bringing their net-long positions to 56,354 contracts. This report is for the week ended Nov. 7 after there had been 3 days of liquidation. This indicates there must have been a significant number of small traders that sold heavily. This may provide some support for the market. Boxed beef prices were mixed with choice down $2.61 and select up $1.82. This may keep a bit of pressure on the market as boxed beef prices continue to struggle. There was nothing else to provide direction for traders, closing higher but somewhat in the middle of the trading range for the day. Feeder cattle posted triple-digit gains, rebounding from being oversold. The upside may be limited as traders may be cautious ahead of the Cattle of Feed report. The Commitments of Traders showed funds selling 864 futures, moving to a net short of 188 contracts.

Hog futures opened higher and closed higher Monday, spending a brief period in negative territory. Higher cutouts on Friday seemed to provide support, which may be temporary as cutouts on Monday showed a loss of $2.65. Cash was slightly positive with the National Direct Afternoon Hog report showing a gain of $0.14. Packers may be more aggressive Tuesday as they may want to procure a large number of hogs early in the week. Technically, the market is in a good position for further gains, but fundamentally, it may not. The Commitment of Traders report showed funds increasing their net-long position by 12,073 contracts, bringing their net-long positions to 13,514 contracts.

	BULL SIDE		BEAR SIDE
1)	The cattle market is oversold and could have a price retracement, which could bounce the market possibly as much as $5.00.	1)	The variability of boxed beef prices does not provide solid support. The large decline of futures might keep packers less aggressive again this week.
2)	The Commitment of Traders report showed funds are not liquidating their long positions as anticipated, which may increase the confidence of traders to buy back into the market.	2)	The upcoming Cattle on Feed report may leave the market choppy for the rest of the week.
3)	Hog futures closed at the top end of the recent trading range and the highest close in over a month, which may increase trader interest in buying into the market.	3)	Hog futures may run out of steam without support from cash and cutouts.
4)	A break above technical resistance may trigger further buying interest regardless of fundamental support.	4)	Much more of a gain may be difficult under the current fundamentals of the hog market. Technical trading will only last until the objective is reached.