September 7, 2016
I anticipate October fats to begin a long hard crawl back to $116.
In my opinion, there is no more news, cattle or situation that has not already been drug through the ringer multiple times. Potentially, this will wind up to be an inverted head and shoulders bottom chart formation.
This makes sense, because after such a long period of marking time, traders were able to revive the supply issues to the extent it has "spooked" producers. The washout has come on heavy volume and exceptional volatility.
As I stated yesterday, the current decline is equal to or slightly greater than any of the previous moves within the sideways pattern. The angle of descent is one of the sharpest as well. In my analysis, these factors are perceived as clues to an impending bottom. I urge producers to be overly cautious about wanting or needing to be short.
I also anticipate feeder cattle to begin moving higher. Although there is no news at all to support this, there is no news that has not already been dissected a multitude of times.
The Elliot wave count remains skeptical at this point as well. I am not advocating being long just yet, but for producers that are heavily short, I recommend reducing that position to some degree.
From the feedyard perspective, the basis has not improved much more over $18.00 with it at $15.57 as I write this. A sharp decline in the index has kept the futures decline from widening the basis further.
Nonetheless, I have little more than clues to go by, but these clues appear to be suggesting to anticipate a reversal with a trek back to the $140 area. In the past, I had suggested a multitude of times that the bottom would not V. However, with so much sideways trading having materialized, the extent and angle of descent, it leads me to now anticipate a V bottom to materialize. I also anticipate the feeder charts to form an inverted head and shoulders.
I wrote some historical analysis on the current market behavior in Tuesday afternoon's Shootin' The Bull column you might find interesting.
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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