Live Cattle April 2021
Weekly Close: $125.175, up $1.40
Secondary Trend: Up
Noncommercial Position (as of Tuesday, February 9): Net-long 92,095 contracts, up 12,900 contracts
April-June Futures Spread: Bearish. $3.875, up $0.075 for the week.
Analysis: April live cattle posted another new contract high of $125.825. Despite continued bearish fundamentals indicated by the April-June futures spread, noncommercial traders continue to provide support, leaving the contract in a sharply overbought situation but still trending up.
Theoretical Position: There are no positions at this time. However, the contract is vulnerable to a bearish turn if commercial selling continues to intensify. The 4-week low is well below the market at $117.925.
Live Cattle June 2021
Weekly Close: $121.30, up $1.325
Secondary Trend: Up
Noncommercial Position (as of Tuesday, February 9): Net-long 92,095 contracts, up 12,900 contracts
June-August Futures Spread: Bearish. $1.625, up $0.15 for the week.
Analysis: The subtle difference between June live cattle and the April contract is the June-August spread has climbed above the previous 5-year low. While still a bearish read on fundamentals, it is not as bearish as the short-term April-June futures spread. Like the April issue, June live cattle extended its secondary uptrend last week to a high of $121.725 despite being sharply overbought.
Theoretical Position: For those holding long futures or looking to establish short futures hedges, sell stops could be placed below support at the 4-week low of $115.875.
Feeder Cattle March 2021
Weekly Close: $140.85, up $2.575
Secondary Trend: Down
Noncommercial Position (as of Tuesday, February 9): Net-long 1,922 contracts, up 590 contracts
Analysis: The secondary trend could still be classified as down based on the bearish reversal posted the week of January 25. If short futures, buy stops could be placed above that week’s high of $144.85. Another rally this coming week would be three week’s against the secondary trend.
Theoretical Position: Short hedges might’ve been established near the recent weekly close of $140.225 (week of December 28).
Feeder Cattle May 2021
Weekly Close: $146.30, up $1.525
Secondary Trend: Down
Noncommercial Position (as of Tuesday, February 9): Net-long 1,922 contracts, up 590 contracts
Analysis: May feeders continue to indicate a secondary downtrend based on the recent bearish spike reversal (week of January 25). This pattern confirmed a bearish crossover by weekly stochastics above the overbought level of 80% the week of December 21.
Theoretical Position: Short hedges might’ve been established near the recent weekly close of $141.775 (week of December 28), or $142.375 (week of January 25). If not, sell stops could be a moving target below the previous 4-day low, with Tuesday being $143.30. The recently established contract high is $147.975.
Lean Hogs April 2021
Weekly Close: $85.20, up $4.90
Secondary Trend: Up
Noncommercial Position (as of Tuesday, February 9): Net-long 51,831 contracts, up 4,954 contracts
April-June Futures Spread: (-$6.70), Bullish
Analysis: April lean hogs posted another new contract high of $87.25 before pulling back into the weekly close (see attached chart). This late selloff was enough for weekly stochastics to establish a bearish crossover above the overbought level of 80% signaling the secondary trend could soon turn down. However, both commercial and noncommercial traders continue to grow more bullish.
Theoretical Position: April lean hogs are in a tough position, technically. In addition to the bearish crossover by weekly stochasitcs, last Friday’s close put the contract in the upper 12% of its price distribution range. With implied volatility moderate at 28% (high is near 30%, low is near 26%), $83 put options could be bought for $3.00 or less, establishing a floor near $80. Not only is this near last week’s low of $79.40 it would also lock in the upper 18% of price distribution (weekly close only).
Lean Hogs June 2021
Weekly Close: $91.90, up $2.35
Secondary Trend: Up
Noncommercial Position (as of Tuesday, February 9): Net-long 51,831 contracts, up 4,954 contracts
June-August Futures Spread: $1.075, Bullish
Analysis: Similar to the April contract, June lean hogs posted a new contract high of $92.55 last week. However, weekly stochasitcs did not establish a bearish crossover above 80%, signaling a move to a new secondary downtrend in the near future. Given this, we can sit back and wait for a better sell signal to develop. That being said, Friday’c close put the contract in the upper 10% of its price distribution range meaning it doesn’t often close above last Friday’s mark.
Theoretical Position: There are no positions at this time. We will wait for the next set of bearish technical patterns before reestablishing short hedges.
