Sort & Cull

Sometimes there's no other way to describe a uniquely volatile commodity: "Western." You know, as in "the Wild West," as in lawlessness, as in unbreakable bucking broncos.

As least, that's the adjective that sprang to mind as I watched cattle futures swing and spaz through February's concluding session. If today's crazy action could somehow be standardized, the CME wouldn't have to worry about closing the cattle pits. It could just move the entire floor to Disneyland and charge for rides.

Between a sharply higher opening, a midsession price plunge, and a closing hour rally, most live and feeder taxis ran up meters in excess of 600 points. It was like the golden age of pork belly trading on steroids.

I suppose this extreme fitfulness was partially prompted by the enormous spread between board discounts and cash spreads. No, there's nothing suddenly new about extremely strong basis levels. Yet the slow but relentless march of the calendar (e.g., with warm weather beef demand not too far around the corner) may have all at once brought the brewing confusion to a decision-making boil.

So what did this western uproar mean? With my neck still smarting from whiplash, I'm taking home two thoughts, one more specific and uncertain, and one more general and confident.

Specifically, nearby live cattle futures came out of today's volatile turmoil looking pretty good. After sinking to new lows on Tuesday (i.e., threatening to once again prove the old saw that triple bottoms never hold), April and June longs successfully regrouped to close the week back above moving average highs.

I would suggest the June chart looks especially impressive, emerging from the last week firefight near the top of its trading range, leaving in its wake what appears to be an island bottom.

Generally speaking, the mere development of greater volatility within a market is often the threshold of a meaningful change in price trend. Major fires always start will a good deal of smoke. Today's market arena seemed thick with the stuff.

For more from John see www.feelofthemarket.com

(AG)

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