Sort & Cull

Trading the Vernal Equinox

John Harrington
By  John Harrington , DTN Livestock Analyst

For those of you still yawning in hibernation, springtime in the Northern Hemisphere officially arrived on Friday. Don't bother fact-checking me with the Farmer's Almanac. Just take a look at how cattle futures are exploding like a bed of tulips on steroids.

Actually, the board first showed signs of seasonal yearning several weeks ago when live and feeder charts began cautiously cutting their way through tough overhead resistance. January's $19 price plunge had played like a nuclear winter, freezing bullish expectations at about the same time huge market hog numbers started to thunder down the CME canyon like an unexpected avalanche.

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But just as the season's first sprig of apple blossoms inspire more smiles than frost-free confidence, the cattle rally of the last two weeks didn't exactly cause me to pack away the sweaters and shop for flip-flops. Yet spring potential suddenly become more credible on Friday (i.e., the first day of spring) when nearby live futures finished well above technical resistance and afternoon cash traded $3-$4 higher on a dressed basis.

Indeed, if there was any doubt before the weekend break that these bullish buds were for real, market skepticism was scattered on Monday when the cattle board surged to the highest price level seen since Jan. 8. By gapping above 100-day moving averages with such determination, I think nearby live contracts are now destined to challenge the early January highs (i.e., $165.65 basis April, $158.20 basis June).

Warning: Spring fever can be as intoxicating as double shots of tequila. Yet, I think my bullish buzz has at least some grounding in market sobriety. Historically, the stretch between late March and mid-May represents the second quarter's "sweet spot," a price-positive confluence of tight feedlot supplies and the best of seasonal beef demand.

In short, if these blossoming technical and fundamental conditions are not worth dusting off the Maypole and celebrating the rites of spring, then you might as well keep that parka at the ready until Independence Day.

For more of John's commentary, visit http://feelofthemarket.com/…

(AG)

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