Live Cattle (Cash Index): The live cattle cash index rolled into a major (long-term) downtrend at the end of November as it fell below the previous 4-month low of $177.42. The index then extended its move to a low of $170.00 before closing December at $172.00. Based on monthly stochastics, there is still plenty of time and space for the cash index to move lower. The initial downside target is near $152.56, the 38.2% retracement level of the previous major uptrend from $92.00 (June 2020) through the high of $190.00 (June 2023). Theoretical Positions: Hedgers likely rolled put options up during the previous major uptrend and sold cash as needed. Deferred hedges were likely put in place when the cash index posted a new 4-month low during November.
Feeder Cattle (Cash Index): The cash market extended its major downtrend to a low of $215.98 during December. Given the degree of the selloff, from the September 2023 high of $254.10, a Wave B (second wave) rally within the 3-wave downtrend would not be surprising. The initial downside target is near $200.67, the 38.2% retracement level of the previous uptrend from $114.23 (April 2020 low) through the September 2023 high. Theoretical Positions: As with live cattle, hedgers have likely continued to roll put options up and sell cash. Additional sales could be made on a possible Wave B (second wave) rally within the major 3-wave downtrend.
Lean Hogs (Cash Index): With the cash index falling to a new low of $65.591 during December, the logical conclusion is lean hogs remain in a major downtrend. The December close of $65.713 was the lowest monthly settlement since $60.07 at the end of December 2020. From a bullish point of view, the cash index did an abrupt about face, closing January 2021 at $67.50 before extending its rally to $122.68 during June 2021. Theoretical Positions: None at this time.
