Technically Speaking

Weekly Analysis: Livestock Markets

Live Cattle: The April contract closed $1.25 lower at $151.025 last week. While technical indicators continue to show the secondary (intermediate-term) trend is down, the contract still looks to have established its Wave C (Elliott Wave theory) low near support at $145.825. This price marks the 61.8% retracement level of the previous uptrend from $130.20 through the high of $171.10. While the futures contract continues to consolidate above technical support, weekly stochastics are nearing a bullish crossover below the oversold level of 20%. While the April to June futures spread continues to reflect a bullish supply and demand situation, Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 6,051 contracts.

Feeder Cattle: The March contract closed $5.75 lower at $199.45 last week. The secondary (intermediate-term) trend remains down. However, the March contract continues to find support near $193.90, a price that marks the 67% retracement level of the previous uptrend from $172.00 through the high of $237.80. Weekly stochastics are nearing a bullish crossover, a signal that would indicate the downtrend has come to an end and the market has moved into either a sideways trend or possibly an uptrend. Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 1,975 contracts.

Lean hogs: The April contract closed $2.975 lower at $69.275 last week. All indications are that the contract remains in a secondary (intermediate-term) downtrend. However, April lean hogs were able to post a solid rally off last week's new low of $66.15, putting weekly stochastics in position to establish a bullish crossover below the oversold level of 20% in the coming weeks. If this occurs the trend could be viewed as sideways, and depending on action in the contract itself, possibly move to an uptrend. Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 602 contracts.

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Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.62, up $0.18 for the week. Weekly stochastics remain neutral to bearish, indicating the secondary (intermediate-term) trend remains down. However, the NCI.X looks to be moving into its seasonal rally lasting through the first weekly close of March. If so it could establish a double-top formation near resistance at $3.84, the 50% retracement level of the downtrend from $4.186 through the low of $2.81. The previous high was $3.80 the week of December 22. Despite a rally in the futures market, national average basis firmed 2 cents last week with the NCI.X 24 cents under the close of the March contract. The combination of stronger basis and a rallying futures market reflects increased commercial demand.

Soybean meal: The March contract closed $0.50 lower at $329.40 last week. The secondary (intermediate-term) trend remains sideways with the March contract holding above support at $321.30 while weekly stochastics are neutral to bearish. Market volatility remains high meaning weekly price swings could remain wide. The market's inverted forward curve continues to show a bullish supply and demand situation, with pressure coming from noncommercial interests. Friday's CFTC Commitments of Traders report showed this group reducing their net-long futures position by 7,782 contracts.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, February 3.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom


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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