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Swift's Market Comments
Live cattle still looking like they could rally

Live cattle still looking like they could rally

I put little stock in Monday's sell-off as a technical indicator; too many factors suggest the opposite.

 

I take Monday's sell off with a grain of salt due to the banks being closed and flooding news along the East coast.

Fats picked up just under 2,000 contracts in open interest on Monday. Divergence of technical indicators to price continue to suggest to me a reversal is in progress. A reversal has been slow in coming, with what appears to have been significant improvement in beef movement and production still running at under 5% increase for the year.

Divergence of technical indicators versus price action in live cattle suggests to me a reversal is in progress.

Toeholds are hard to find and even harder to gain traction when found. I continue to perceive that participation in short hedges increases risks by as much as they may mitigate them. Solidifying a loss by selling a futures contract is not recommended.

If one had to have further downside protection, a put option would be favored over a futures contract. This would still increase risks to some degree from the premium that would be paid and still further decrease the minimum sale price.

With the October perceived having lost the ability to rally, traders have left it to flounder until expiration. The focus shifts to the December and February contracts. With both the December and February contracts premium to October, when October goes off the board, the weekly continuation chart will get a well-needed boost.

The discounts of the feeder board will continue to work just the opposite with the weekly continuation chart. As each month expires, the next one being reflected on the weekly chart will most likely be at new lows for the next few contract months out.

A reversal in the spring months will be needed and that may only come after the fall calf run is complete to see what size the calf crop actually is.

A reversal in this market is going to have to come from the top down. Consumers are going to have to increase consumption to have much of an impact on feeders.

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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