Live Cattle April 2021
Weekly Close: $119.025, down $0.975
Secondary Trend: Down
Noncommercial Position (as of Tuesday, March 2): Net-long 83,632 contracts, down 5,875 contracts
April-June Futures Spread: Bearish. $1.025, down $0.55 for the week.
Analysis: April live cattle continued to build on its bearish spike reversal from the week of February 15. Selling is coming from both commercial and noncommercial traders, with the initial downside target at $115.35. However, given the bearish fundamentals indicated by the April-June futures spread a test of the $111.85 to $108.35 range is possible.
Theoretical Position: It’s possible new short hedges were established on last week’s move to a new 4-week low below $121.25. The cash market continues to hold, reportedly, near $114.00.
Live Cattle June 2021
Weekly Close: $118.00, down $0.425
Secondary Trend: Down
Noncommercial Position (as of Tuesday, March 2): Net-long 83,632 contracts, down 5,875 contracts
June-August Futures Spread: Neutral. $0.925, down $0.45 for the week.
Analysis: Technically, the June live cattle contract is similar to April in that it posted a bearish spike reversal the week of February 15, indicating its secondary trend had turned down. This pattern was confirmed with a move to a new 4-week low below $117.075 last week. Fundamentally June cattle are neutral, as indicated by last week’s close by the June-August spread sitting closer to the previous 5-year average of $1.5325 than the previous 5-year low of (-$1.075).
Theoretical Position: Similar to April, some short hedges may have been established with last week’s move to a new low below $117.075.
Feeder Cattle April 2021
Weekly Close: $139.025, down $3.55
Secondary Trend: Down
Noncommercial Position (as of Tuesday, March 2): Net-long 1,740 contracts, down 128 contracts
Analysis: April feeder cattle extended their secondary downtrend to near the next target of $136.55 last week, hitting a low of $137.225 before rallying into the close. An early selloff this week would not be surprising, setting the stage for a turn to a new short-term uptrend. Fundamentally the market is growing more bearish, as indicated by the strong downtrend in the April-May futures spread. This should extend the secondary downtrend.
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: $145.15, up $0.075
Secondary Trend: Sideways
Noncommercial Position (as of Tuesday, March 2): Net-long 1,740 contracts, down 128 contracts
Analysis: May feeders continue to consolidate between support at the 4-week low of $141.65 (last week’s low) and 4-week high $147.475 (also last week’s high). The most recent technical signal was a bearish spike or 2-week reversal posted the week of January 25.
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-week low, last week’s low, of $141.65.
Lean Hogs April 2021
Weekly Close: $87.175, up $0.025
Secondary Trend: Up
Noncommercial Position (as of Tuesday, March 2): Net-long 74,565 contracts, up 3,685 contracts
April-June Futures Spread: (-$8.25), Bullish
Analysis: April lean hogs seem to be losing some bullish momentum as the contract posted an inside trading range last week. Meanwhile, weekly stochastics remain above the overbought level of 80% hinting at potential selling over the coming weeks, particularly with noncommercial traders increasing their net-long futures position. Fundamentally the contract remains bullish, though we did see some commercial selling to close out last week.
Theoretical Position: April lean hogs remain in a tough position given the continued secondary uptrend, overbought situation, and recent commercial selling. Support at the previous 4-week low is all the way back at $79.40. Given moderate implied volatility of roughly 28%, one could look at an $87.00 at-the-month put option for $3.00 premium or so, putting a floor price in at $84. Theoretically, next week’s 4-week low support would be $83.625.
Lean Hogs June 2021
Weekly Close: $95.425, up $1.25
Secondary Trend: Up
Noncommercial Position (as of Tuesday, March 2): Net-long 74,565 contracts, up 3,685 contracts
June-August Futures Spread: (-$0.20), Neutral
Analysis: Similar to the April contract, June lean hogs consolidated within the previous week’s range last week. With weekly stochastics still indicating an overbought situation, support is at the previous 4-week low of $89.175.
Theoretical Position: There are no positions at this time. We will wait for the next set of bearish technical patterns before reestablishing short hedge
