Cattle futures tested and held significant support on Friday. Does that setup for a rally to start the week?
Live Cattle (December)
December live cattle got hit hard on Friday but held the bottom end of our 4-star support pocket nearly perfectly, which came in at 184.55, the low was at 184.45. That pocket was able to offer an opportunity for Bears to reduce/exit and Bulls to dip the toes in long. If that reversal holds and leads to strength to start this week’s trade, the first upside objective would come in from 187.67-188.00. A break and close below 4-star support would keep the door open for more long liquidation. This is a big week for the outside markets with the election on Tuesday, data all week long, and the Federal Reserve interest rate decision on Thursday. We think this set’s up for a tradable week on both sides of the market.
Resistance: 189.47-190.075, 191.47-191.62
Pivot: 187.675-188.00
Support: 184.55-185.20, 182.82-183.325
Daily Cattle and Beef Summary
Cutout values were softer on Friday afternoon with choice cuts 1.26 lower to 316.34 and select cuts -.34 lower to 285.03. The 5-area average price for live steers was reported at 189.82, mostly steady for the week. Friday’s slaughter was reported at 119k head, 6k more than the previous week but 4k less than the same day last year. Weekly slaughter as of Friday afternoon was reported at 609k, that compares with 604k last week and 623k last year.
Seasonal Tendency Update
Below is a look at historical price averages for February futures on a 5, 10, 15, 20, and 30 year time frames (Past performance is not necessarily indicative of future results). The chart appears to show that the first half of November is a tough time for the market to stage a meaningful rally. Whether or not that rings true this year is TBD. As mentioned for the last week, volatility is still relatively low which may make options an appealing tool to help manage risk or express an opinion in the market with limited risk.
Commitment of Traders Update
Friday’s Commitment of Traders report showed funds were net buyers of about 7.7k futures and options contracts, expanding their net long position to 100,516 contracts. That registers as the largest net long position since September of 2023.
Lean Hogs (February)
February lean hogs made new highs on Friday but closed slightly off the highs. With Funds positioned at extreme levels and the RSI lingering in overbought territory, it makes one wonder how much upside is left. Even if the market does keep going higher, is the risk of long liquidation greater? I would say yes, but the old saying “the markets can remain irrational longer than you can remain solvent” comes as a reminder that you are not bigger than the market. As mentioned last week, we liked looking at options to play for a counter trend trade. We talked about extremely low volatility early last week, but that firmed into the back half of the week.
Resistance: 86.225**
Pivot: 84.30-83.65
Support: 82.05-82.27, 80.90-81.20*
Commitment of Traders
Friday’s Commitment of Traders report showed funds were net buyers of about 14.5k contracts, nearly all of that coming from new longs. That expands the net long position to 107,169, a new record. Broken down that is 119,028 longs VS 11,859 shorts.
Seasonal Tendency Update
Below is a look at historical price averages for February futures on a 5, 10, 15, 20, and 30 year time frames (Past performance is not necessarily indicative of future results).
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