Live Cattle (Cash Index): The live cattle cash index remains in a major (long-term) downtrend despite January’s higher close. The cash index could add to this month the next couple months, making it a total of 3 months against the major downtrend. The key will be the previous 4-month high of $185.50 from October. 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): Despite the rally during January the cash index remains in a major downtrend. The move looks to be a Wave B (second wave) rally within the 3-wave downtrend pattern. If so, the next upside target is near $239.54, then the previous high of $254.10 (September 2023). 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): The cash index completed a bullish key reversal during January, confirming the major trend has turned up. This pattern was completed in conjunction with a bullish crossover by monthly stochastics below the oversold level of 20%. Theoretical Positions: New long positions could be established near the January close of $71.48 with stops below the January low of $65.048.
