Technically Speaking

Weekly Analysis: Livestock Markets

Source: DTN ProphetX

Live Cattle: The February contract closed $5.075 lower at $160.60 last week. The secondary (intermediate-term) trend remains down with last week's action establishing a bearish outside week. This would indicate Feb live cattle has concluded the second wave of an Elliott Wave three-wave downtrend with its test of resistance at $166.87, a price that marks the 67% retracement level of the first wave down from $172.75 through the low of $155.10. The third wave should result in a test of support at $150.80, a price that marks the 50% retracement level of the previous uptrend from $128.85 through the high of $172.75. Given the continued bullish commercial outlook indicated by the February to April futures spread the 50% retracement level should hold, with weekly stochastics expected to fall below the oversold level of 20%.

Feeder Cattle: The March contract closed $8.90 lower at $212.55 last week. March feeders posted a bearish outside week last week, indicating the minor (short-term) uptrend has come to an end and the secondary (intermediate-term) downtrend has resumed. Last week's high of $224.475 looks to be the peak of the second wave of an Elliott Wave three-wave downtrend, with the third wave projected to slide to a low of $192.15. This target is calculated by viewing the second wave as a bearish flag flying at half-mast, with the initial "flagpole" (sell-off) covering a range of $20.925 (initial bearish breakout at $228.625 through the initial low of $207.75). Subtracting that range from this week's bearish breakout of the previous week's low of $213.075 puts the target at $192.15. This would be a test of support near $193.90, a price that marks the 67% retracement level of the uptrend from the low of $172.00 through the high of $237.80.

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Lean hogs: The February contract closed $2.275 lower at $79.025 last week. The secondary (intermediate-term) trend remains down with the Feb contract extending its sell-off below support near $79.30. This price marks the 76.4% retracement level of the previous uptrend $72.95 through the high of $99.925. However, weekly stochastics below the oversold level of 20% indicate the contract could continue to hold near this support before turning up again.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.69, up 6 cents for the week. Despite the higher close the secondary (intermediate-term) trend of cash corn remains down with an initial target of $3.47. This price marks the 33% retracement level of the previous uptrend from $2.81 through the high of $3.80, a test of longer-term resistance at $3.84. Given the neutral to slightly bearish commercial outlook indicated by the carry in the futures market's forward curve the NCI.X could extend its downtrend to the 50% retracement level of $3.31.

Soybean meal: The March contract closed $8.70 higher last week at $349.10. One of the main factors of soybean meal is its high market volatility, calculated at about 53.2% at Friday's close. This has the March futures contract posting wide price swings while keeping its secondary (intermediate-term) trend sideways to down. Support remains at $335.90, a price that marks the 50% retracement level of the rally from $292.60 through the high $379.70. Resistance is between $365.60 and $371.30, the 61.8% and 67% retracement levels of the previous downtrend from $410.60 through the low of $292.60.

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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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Comments

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DARIN NEWSOM
1/14/2015 | 6:51 AM CST
Good morning, and thank you for your comments. As DTN customers, you're familiar with my thoughts on government reports. I'm going to address some of your concerns in this Friday's On the Market column.
DAVID/KEVIN GRUENHAGEN
1/14/2015 | 12:09 AM CST
Another USDA report-another round of serious negative "market " downtrends. Obviously 10 dollar soybeans are too much for the USDA to handle so a quick tweak of numbers and "estimates" about some other foreign country and their "projected" yields and here we are again. Just patent your lies and reports you corrupt government agency for how effective your tactics are to manipulate and control your USDA "markets." Oh we can not thank them enough for their "bullish" reports on corn, today 1-13-2015 look at what happened to corn futures. Now that prices are below cost of production, how far will this corrupt agency go. I am sure their information is spot on regarding their "estimates' concerning other countries.