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Swift's Market Comments

More down movement today?

More down movement today?
New lows in fat cattle Monday suggest we’ll slip further in pricing on Tuesday.

 

A new contract low was made Monday in all of this year’s remaining live cattle contract months. With not a long position having a profit at the close of the day, one should anticipate a lower trade Tuesday.

I anticipate a trade to $105.00 August. The worst part of this will be it is two weeks before the on-feed and inventory reports come out. Traders may retreat further from the number of contracts traded and hence increase volatility.

Fed cattle continue slipping down this long downward-sloping channel and feeders look like they might follow.

Nothing has changed from my perspective. I perceive the wide positive basis to increase risk rather than mitigate it for producers. The miniscule fluctuations between volume and open interest leads me to perceive that this is still more an issue of lack of capital to defend a long position than anything else.

These new lows will be watched carefully by everyone as I anticipate this move could make for an exceptionally advantageous trade toward the packers and end users. End users may want to use this as an opportunity to lock in some inventory for the coming months if unable to do so with a packer.

The spread between cash and futures is wide, but when you look at fat cattle futures versus boxes, it is stupendously wide. I’ll be looking deeper into this to see if there is some benefit to owning calls for end users with this much discrepancy in spread.

In feeder cattle markets, Elliott Wave Theory projects a possible move down again for the current wave cycle. Although confirmation has not been solidified, as it was in the fats with a new contract low, the feeders appear to want the same. If so, then a break below current contract low of $134.25 August would lead me to anticipate a trade to $131.05.

Similar to the fats, attempting to do anything in this area is perceived to increase the risk of loss, rather than attempt to mitigate it.

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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