Farm Progress

Weak fundamentals and a move up on the charts say to re-evaluate hedging opportunities.

Chris Swift 1, Blogger

November 1, 2016

3 Min Read


I expect the $105.00 cash trade last week to spill over into this week with a $106.00 to $108.00 cash trade.

If this begins to materialize on Wednesday, I anticipate the futures to put on about $2.00 to $3.00 to keep it as close to an even basis as possible. There is no need for futures to get ahead of themselves at this time. The future at this time does not present a bullish fundamental outlook.

What I perceive as the strength is that fundamentals are no longer as bearish as they once were. This turning point is going to be contentious for most.


As was presented to me this morning, long term trends of price decline, oversupply and stable demand are not bullish points. True, and as I have recognized these factors, I perceive that most others have as well. This leads me to perceive that if downside protection were needed, it is already applied. I view the current situation to unfold over a two- to four-month long series of moves.

No doubt it will be tough to keep from wanting to make sales when bearish news is refreshed, but with the fledgling turns being noted, one may want to review how to be hedged, rather than just hedged.

Feeder cattle have drawn a breath all on their own recently. Their chart pattern differs from the fats. The extent of the rally from contract low, coupled with the extent of the correction, begins to produce the look of a wave one and wave two. With January now having broken to a new high while writing this, it is now confirmed that a wave one and two, or wave A and B, have been completed, with a wave three or C in progress.

Upside target for wave C measures to $124.30 and a wave 3 measures to $130.00 January. This trade is unraveling fast this morning.

A huge boost is for cattle in general was given today with the charging higher Australian dollar. The Canadian dollar is higher as well, but not to the same extent. As these two countries are significant to our beef industry, the currency fluctuation between them and the US is important. The Aussie dollar only lacks a few tics from exceeding its current high close.

A major wave three rally is anticipated for the Aussie and Canadian dollars. This would continue to be perceived beneficial as it would slow imports and accelerate exports. So, seemingly more than anything, there just appears to be some countering of the overwhelming bearishness that is cause for a potential reversal.

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.

About the Author(s)

Chris Swift 1


Chris Swift is a broker and advisor in Nashville, Tennessee, offering technical and mechanical analysis of the commodity market to help people improve their risk management.

To contact Swift about hedging or to subscribe to his daily market comments at:

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