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Swift's Market Comments

Live cattle analysis: Maybe more downside

Live cattle analysis: Maybe more downside
Feeder cattle technical analysis says the fall may be finished.


As of this morning, I am looking for some confirmation to wrap up this entire bear market for some time to come, this week or next. Stay with me.

The weekly continuation, close-only chart on fats has five waves down. The fifth wave is perceived to only have four of the five needed to complete [an Elliot Wave pattern]. The current wave 3 low close is $120.72. June is flirting around that area, and were it to close under $120.72 it would confirm that wave five of five is in progress; not necessarily complete, just in progress.

Wave Theory: Elliot Wave theory counts downs and ups as waves, specifically waves of eurphoric optimism and alternating paranoia.

Wave number one and number five have similar lengths from the Elliott Wave perspective. If this wave five of five were to equal the length of wave one, it would put June futures down to a close of $116.57. So, downside price projection is $116.57.

Note that I do not want to participate in this decline if it materializes. First, there is the potential June could fall way short of the target and second, I'd rather be prepared to be a buyer than attempting to capture what is perceived the last of this move down.

Packers are urged to view the discounts of August as advantageous. As the fifth wave is perceived unfolding on the weekly charts, use this decline to your benefit with call options.

For feedyards, I see no reason to hedge at such a discount. Barring one anticipating cash falling to the current price of futures, selling the discount is perceived increasing ones risk more than mitigating it.

Feeders bottomed?

As for feeder cattle, the rally from $142.87 to $149.77 in the August contract I perceive to have unfolded into a five-wave pattern. The congestion from the high of $149.77 to present I perceive as a correction of the prior rally. This leads me to anticipate a rally to begin somewhere in this vicinity. Upside projection is up to $155.62 first stop, with the potential up to $161.00.

To the best of my analysis, I do not perceive that feeders have enough of a similar pattern to the fats that suggests a new low is warranted or needed to complete a specific chart/price pattern. 

An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. Past performance is not necessarily indicative of future results.

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