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Swift's Market Comments

Live cattle showing signs of life

Live cattle showing signs of life
Uphill price movement must overcome three points of major chart resistance.

 

Some positive factors are creeping into the live-cattle market this morning.

The Japanese yen is moving higher, and a strong yen suggests an increase in buying power from our largest export market. As well, it is noted they have discontinued mandatory checking for BSE. Also, Saudi Arabia lifted some bans on US beef. While this is most likely insignificant in the big picture, every little bit helps at this point.

August fats have reversed in quick fashion. There remain some uphill battles to be fought with the first resistance at $115.70. Above that, the next two strong holds will be $119.42 and then the big one at $120.67.

This live-cattle chart shows the market must move up out of its channel and through three levels of resistance from old highs set on the way down.

If prices move above the last high, it will be the first time traders have been able to push prices above a previous high of significance. It remains way too early to suggest recommendations were correct to not short hedge inventory at this level with futures or options. However, if traders are able to exceed the last strong hold of $120.67, it will suggest the recommendation to have been advantageous.

There are a lot of what-ifs in my analysis. Here is one I am leaning on. With the increase in open interest yesterday, there are perceived still those who anticipate a lower trade. If traders continue to push prices up going into next Friday's slew of reports, and the reports are at least not bearish, shorts would be perceived over a barrel. This may be a little farfetched at this time, but by this time next week, we should have a pretty good idea of the trade guesses.

Then we'll be able to hopefully dissect participants’ actions and reactions to form an opinion for the next most probable move.

You may also have noticed feeders remain hesitant to participate to the same degree as the fats. I perceive this is due to the fundamentals at hand, with the anticipated increase in calf inventory and reluctance from feed yards. It does not suggest that feeder can't or won't rally. It is just that I am not anticipating the start of a bull market. Like the fats, there is significant resistance that lies above.

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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