July 25, 2016
In the live cattle contracts, I anticipate the ability of bears to push prices to another round of new contract lows has been diminished greatly. This does not lead me to anticipate a bull market, but potentially for trading to begin moving toward the upper end of the range than lower.
It will more likely than not take a few more weeks to see if my previous recommendations have validity. I understand the risk of not hedging may have been as difficult as hedging. In this instance though, my analysis suggested that risk was elevated when attempting to market a product dollars cheaper in the future than at present.
A move this strong does not lead me to anticipate a bull market, but potentially for trading to begin moving toward the upper end of the range rather than the lower.
A narrowing of the basis by futures moving to cash would be perceived as the analysis was correct.
With feeder cattle contracts, the most interesting this morning are the back months. January and further out never set a new contract low. All of the 2017 contract months have a five-wave move higher from their respective contract low on the close-only chart.
The May contract has already exceeded its previous high without having made a new contract low. The January, March and April are not far from doing the same.
This gives the feeder market the first friendly look to it in some time. So, this year's patterns could have fallen prey to the rare fifth-wave Elliot Wave pattern in which the fifth wave is subdivided into five waves of three instead of five waves of five.
Feed yards are urged to begin making purchases of spring inventory.
Corn traders tried to push December corn to a new low this morning. As of yet, to no avail. I see nothing to do in the corn market at this time.
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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