Cattle futures trade sharply lower in Tuesday’s session. How much more downside is left?
With today’s volatility we thought it would make more sense to share our take on the market this afternoon rather than tomorrow morning. If you have any questions, please don’t hesitate to reach out!
Technicals (June-M)
Today’s trade was a snowball like event with bearish headlines feeding on themselves which led to somewhat of a capitulation. I think you still saw some follow-through selling from Friday’s Cattle on Feed report, you had concerns of avian flu spreading, we are entering a time of year that is historically bearish, you had a technical breakdown, and we have the end of month and end of the quarter this weeks with funds not wanting to give back everything they worked so hard for since the start of the year. Is the bottom in? That is still TBD, seasonals would suggest no, but even if it isn’t, I wouldn’t be expecting to see a similar fall out to what we saw at the end of the last year. The main reasons being that we are starting from lower price points with a similar fundamental backdrop, and the second being the fact that Funds are only 60k contracts long, nearly half of what they were last Fall. We’ve had a bearish tilt to our bias for the last several weeks, but the recent pullback is starting to shift the near-term risk back to the upside in our opinion.
Resistance: 181.95, 185.85-186.625**
Pivot: 179.825-180.625
Support: 175.70-176.40****
Seasonal Tendencies (June Live Cattle)
Below is a look at historical seasonality’s (updated each Monday) VS today’s prices (black line). Seasonally we start to see June futures soften up, but if you’ve been watching cattle at all over the last year you know that seasonals tendencies tend to have had a lower correlation this year.
*Past performance is not necessarily indicative of futures results.
Commitment of Traders Snapshot
(updated on Mondays)
Friday’s Commitment of Traders report showed Fund positioning was little changed, holding a net long position of 62,391 futures/options contracts. Broken down that is 84,973 longs VS 22,582 shorts.
Feeder Cattle
Technicals (April- J)
In yesterday’s report along with other recent reports we noted that: “247.15.248.00 is going to be a big pocket to keep an eye on, a break and close below that could accelerate the selling pressure.”. Accelerate is exactly what we got and may be even an understatement as prices dropped as low as 243.80 in today’s trade. As mentioned with live cattle, our bearish bias in feeder cattle is starting to shift as prices become more attractive. With that said, the technical landscape and the thinner volume trade has us a little hesitant to flip the script just yet. Previous support will now be resistance, that comes in from 247.15-248.00. If the Bulls can crawl back above this level, we could see additional relief take prices back above 250.00.
Resistance: 252.60 253.85, 256.90** 260.65-260.80
Pivot: 247.15-248.00
Support: 243.80**, 240.50, 238.50
Seasonal Tendencies
Below is a look at historical seasonality’s for May Feeder Cattle (updated each Monday) VS today’s prices (black line). Historically, this isn’t the best time to get supper bulled up on Feeder Cattle, but time will tell.
*Past performance is not necessarily indicative of futures results.
Commitment of Traders Snapshot
(updated on Mondays)
Funds hold a net long position of 11,453 futures/options contracts.
Lean Hogs
Technicals (June-M)
June lean hogs were higher early but failed to sustain the momentum and closed slightly lower. If the market continues to stall and we take out today’s low, we could see pressure take prices back to trendline support which is continuing to creep higher.
Resistance: 103.00-103.50****
Pivot: 101.15
Support: 98.60-98.80, 97.42-97.80
Seasonal Tendencies
Below is a look at historical seasonality’s for June lean hogs (updated each Monday) VS today’s prices (black line).
*Past performance is not necessarily indicative of futures results.
Commitment of Traders Snapshot
(updated on Mondays)
Friday’s Commitment of Traders report showed funds little changed from the previous week, holding a net long position of 62,877 contracts. Looking back at historical holdings, this is on the larger side of things.
