Technically Speaking

Weekly Analysis: Livestock Markets

Live Cattle: The February contract closed $3.20 higher at $165.675 last week. While the secondary (intermediate-term) trend remains down, the minor (short-term) uptrend has resulted in a test of resistance near $166.875, a price that marks the 67% retracement level of the initial sell-off from $172.75 through the low of $155.10. The pattern on the weekly chart resembles the first two phases of a typical Elliott Wave downtrend. The third wave would be projected to see the contract fall from this test of resistance to a test of support at $150.80, a price that marks the 50% retracement level of the previous uptrend from the contract low $128.85 through the contract high of $172.75.

Feeder Cattle: The March contract closed $9.55 higher at $221.45 last week. Despite the higher close the secondary (intermediate-term) trend of the market remains down. Last week's high of $221.825 closed a bearish gap left the week of December 15 between $221.25 and $219.725, resulting in a test of resistance pegged near $222.80. If like live cattle this is the conclusion of the second wave of a three-wave downtrend, then the March contract would likely turn lower toward a test of secondary support at $204.90. This is the 50% retracement level of the previous uptrend from its contract low of $172.00 through its contract high (part of a double-top high) of $237.80.

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Lean hogs: The February contract closed $0.25 lower at $81.30 last week. While the secondary (intermediate-term) trend remains down, contract continues to consolidate above its recent spike low of $78.675. Weekly stochastics are below the oversold level of 20%, indicating a possible bullish crossover into a secondary uptrend in the weeks ahead.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.63, down 18 cents for the week. The secondary (intermediate-term) trend remains up. As discussed the last few weeks, the secondary (intermediate-term) trend turned down after the NCI.X fell back from its test of technical resistance at $3.84. Weekly stochastics established a bearish crossover above the overbought level of 80%, confirming the move to a downtrend. Initial support is pegged at $3.47, the 33% retracement level of the previous uptrend from the $2.81 low through the high of $3.80. However, given the continued bearish carry in futures spreads the NCI.X could test the 50% retracement level of $3.31.

Soybean meal: The March contract closed $21.40 lower last week at $341.40. The secondary (intermediate-term) trend is sideways with support pegged at $335.90, a price that marks the 50% retracement level of the previous uptrend from $292.60 through the high of $379.90. However, given last week's bearish outside week and despite an inverted forward curve (bullish market fundamentals), the March contract could look to extend its sell-off to the 67% retracement level of $321.30.

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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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