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Swift's Market Comments
April live cattle chart Swift Trading Company
This April live cattle chart shows the needed aggregation between futures and cash, but only time will tell us where the two will meet.

Basis still treading a wide path

If the extremely wide basis meets in the middle, that would be a good outcome.

The aggregation of the basis continues in live cattle. I don't know of another way to address this current environment.

The division grows between those who see demand helping to curtail supply and those who see supply overwhelming demand. The futures markets lean toward supply swamping demand, while cash markets lean more toward demand overcoming supply.

In my opinion, a meeting in the middle would be about as good a resolution as one could ask for.

We will know a great deal more when April fats expire. How much April futures moved higher from the February expiration and how much lower cash moved will help to determine which side of the equation traders leaned to. This is anticipated to be helpful when attempting to decipher the expiration level of the June contract.

I see little to do at this juncture. The Moore Research weaker seasonal tendency ends today and begins to reflect a higher seasonality for the next several weeks. They provide statistical trades and there are three coming up on April 22 to buy cattle. While I may or may not conform with their analysis, I will not be going against it.

The three-day weekend, lack of cash trade, and skepticism produced by the saber rattling may keep traders hesitant to do much of anything.

I perceive feeders are in a minor Elliott wave 2 correction phase. Two to three days of sideways to lower movement is anticipated. Like the fats, there is little to do at this juncture. If hedges are a must at this level, I continue to recommend doing so with options or options strategies that leave the top side open.

Like the fats, the seasonality for feeders turns higher next week and runs into the end of July. Not to say that feeder prices will continue to climb, but at worst I would anticipate a pattern to form similarly to the one produced from January thru March. This would be a marking of time for feeders to see how well the fat market absorbed the anticipated increase of inventory.

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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