A Holiday Week Gut Check Posted on 11/25/2014 by The Beef By Cassie Fish, CassandraFish CME cattle futures are giving bulls a gut check for Thanksgiving, selling off sharply yesterday on nothing but good news. The weekly spot chart could have made a double top and looking at the weekly Dec LC chart, the market dramatically posted what may well be a weekly reversal off of a life-of-contract high. Ominous potentially bearish technical signs, all on the Monday of a holiday week. Last Friday’s close was $170.90 and if Dec can close at that level or higher, it will turn what now looks bearish into a bullish chart pattern. It will need to accomplish this feat during reduced market participation and a reduced trading day this Friday. The bull spreads are working well on the break and futures are discount to cash, two positive factors. Feeder Futures Get Pounded Feeder cattle futures especially are suffering, breaking a fast 800 points from last week’s high with spot Jan dropping below the 40-day moving average. Feeders went through a similar correction in October and are close to a seasonal low. Spot Jan is also about $8 discount to the index. Can Lower Futures Help Packers? Packers are hoping to use the break on the board for leverage when buying cattle this week and who can blame them. Feedlots are ringing the register with record profits and last week’s cash fed cattle prices were record high making steady this week still a heck of a trade. It’s well known packers are buying for next week’s bigger kill. It may or may not be as well-known that some packers are hauling cattle as far as 2 states away, from north to south, in order to fill out schedules. The USDA cutout still added modest value yesterday but packer margins are even uglier this week than last. There is significant incentive to cut kills the second half of December, and cuts will likely be big. The feeling lurking in the back of most traders’ minds is simply that a “pause for the bull cause” could begin at any time and may have started yesterday. After all, there was a lot of good news priced on yesterday’s opening. That feeling is as good an explanation as any for the current correction as we enter the final weeks for the Bull of 2014. More upside is possible and even likely for Q1. But the holidays with their delights and disruptions, can make for some dicey trading maneuvers between now and then. The Beef will resume Monday, December 1. Happy Thanksgiving and thanks to each of our readers! The Beef is published by Consolidated Beef Producers…for more info click here. Disclaimer: The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
Posted on: Tue, 25 Nov 2014 20:06:38 +0000
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