Technically Speaking

Livestock Markets: Weekly Analysis

Source: DTN ProphetX

Live Cattle: The December contract closed $3.40 higher last week. Despite last week's higher close, the possible 5-point top formation remains in place. However, the December contract closed at its weekly high of $162.10 indicating buying early this coming week could lead to a test of the recent high (point 5 high) of $163.875. Market volatility remains high (14.2%), a factor that could spark another round of noncommercial long-liquidation. Friday's CFTC report showed this group reducing their net-long holdings by 4,517 contracts from last week's report to 91,388 contracts.

Feeder Cattle: The November contract closed $5.275 higher last week. The secondary (intermediate-term) trend remains up, with the November contract posting a new high of $231.60 last week, also the weekly close. Strong support at the end of last week could lead to follow-through buying this coming week. The contract still looks to be in the process of establishing a 5-point top as trade volume continues to increase.

Lean hogs: The December contract closed $0.375 lower last week. The minor (short-term) trend is sideways, with support near $91.40 and resistance at $98.45. The secondary (intermediate-term) trend remains down with resistance at that same $98.45 level. Recent buying interest from the commercial side of the market, as indicated by the uptrend in the December to February futures spread, has allowed the December contract to rally off the low of $84.275.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $2.89, down 13 cents for the week. This is the lowest weekly close since the $2.8251 posted the week of August 31, 2009. Beyond that is the $2.6890 from the week of December 1, 2008. National average basis continues to trend down, weakening another 5 cents to 34 cents under the December futures contract. The NCI.X is also 70 cents under the September 2015 contract, the weakest it has been at this point in the marketing year compared to the previous 5-years.

Soybean meal: The October contract closed $16.90 lower last week. The secondary (intermediate-term) trend remains down. Major (long-term) support is at $274.80, the low from December 2011. Fundamentally the market remains bullish with the forward curve (series of futures spreads) from October 2014 through March 2015 still inverted. However, this price relationship continues to weaken.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, September 23.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

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