In live cattle, the weekly close-only continuation chart shows a five-wave move up.

The discounts of February to the previous December, April discount to February, and so on, is anticipated to keep the weekly chart in a correction of this up move for several months to come.

This does not necessarily mean a bear market in the futures. I anticipate several different turns in events that for some weeks may have futures narrowing the positive basis, while other weeks it is the cash.

With the price of fats seemingly finding some resistance at the current level, basis trading will become more of a focus than price direction. The weekly continuation chart can remain in a corrective pattern for months with the discounts of futures.

What I am attempting to avoid now with the positive basis is to not solidify a price with futures at a discount. I strongly urge you to lock in a minimum sale floor, but leave the top side open in case of weather or hopefully improved consumer demand.

In feeder cattle, Friday's trade could have been a reversal. Like the fats, though, I do not anticipate a new contract low from the completion of the current rally off contract low.

The appearance of a five-wave structure is vivid enough to keep me from calling for a new contract low. What I anticipate is the development of a sideways-to-lower trading range in an attempt to transition from the extremes of liquidation/expansion, capital loss and wide price swings. This will take a tremendous amount of time.

As this is unfolding, I would anticipate feeder prices to trade within the current price range of contract low to the most recent highs several times before resuming an uptrend. I see no reason to change strategies at this time. I recommend you have now have two-thirds of your inventory with a minimum sale price underneath them. I continue to recommend either an at the money put or bear put spread to solidify your minimum sale price.