Technically Speaking

Weekly Analysis: Livestock Markets

Live Cattle: The December contract closed $3.40 higher at $170.20. December live cattle established a new high of $170.575 last week, extending its minor (short-term), secondary (intermediate-term), and major (long-term) trends. Trade volume for the contract exploded to 177,400 contracts last week while open interest decreased to about 78, 700 contracts. This change in open interest was due to a roll of longs from the December to February, with the latter seeing an increase to about 82,800 contracts.

Feeder Cattle: The January contract closed $3.675 higher at $236.125. The secondary (intermediate-term) trend remains sideways as the January contract holds below its recent high of $239.30. Open interest decreased slightly on the rally, possibly indicating early profit-taking by the noncommercial side of the market.

Lean hogs: The December contract closed $3.90 higher at $92.675. December lean hogs remain in a secondary (intermediate-term) sideways trend. Support is near the recent low of $84.275, roughly the 67% retracement level of the uptrend from $74.00 through the high of $105.50, while resistance is at the recent high of $99.000. The minor (short-term) trend is up.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.45, up 16 cents for the week. The secondary (intermediate-term) trend of the cash market remains up. The NCI.X is testing initial price resistance at $3.50, a price that marks the 50% retracement level of the previous downtrend from $4.86 through the low of $2.81. Weekly stochastics remain bullish, and with the December to March futures spread in position to establish a possible uptrend, the NCI.X could test the 50% retracement level of $3.84.

Soybean meal: The December contract closed $10.50 lower last week at $379.90. With the move to a new high of $417.60 the secondary (intermediate-term) trend remains up, though the lower weekly close would indicate a move to a minor (short-term) downtrend. With the forward curve still inverted, though this price relationship has weakened, initial support is pegged between $376.80 and $370.8. These prices mark the 33% and 38.2% retracement levels of the initial leg of the secondary uptrend from $295.10 through last week's high. If this area doesn’t hold, the December contract could fall back to the 50% retracement level of $356.40.

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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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