The February Live Cattle contract started the New Year on a high note, opening (122.25) above the Friday settlement (121.55) and never looking back. The Tuesday, January 2, 2018 trade took its cue from aggressive buying late Friday in the cash market. Live sales took place at 123.00 and dressed sales came in at 195.00. This was 3.00 higher than the prior week for live and 5.00 higher for dressed. Expectations for this week in the cash market are for steady to higher prices. The first fedcattleexchange.com auction for 2018 is on Wednesday with only 388 head for sale. The February contract ended the day (123.40) above resistance (123.125). This will be the key level for trade on Wednesday, in my opinion. A break down from 123.125 could see price test support at the December 28 high (122.60) and then the rising 50 DMA now at 121.825. Support then comes in at 121.325. Holding above 123.125 could see price approach resistance at 124.675. Resistance then comes in at 125.50. The negotiated cash trade was quiet on Tuesday. Tuesday afternoon boxed beef cutout values were higher on Choice and Select on moderate demand and light offerings. Choice was up 2.24 to 205.14 and Select was up 3.59 to 196.57 on 103 loads. The choice/ select spread narrowed to a plus 8.57. The estimated cattle slaughter for Tuesday was reported at 113,000.
The March Feeder Cattle contract gap opened (143.55) higher to start the New Year and ran over the 144.925 and 146.20 resistance levels on its way to a limit up move on the 1st day of trading. It rallied to a high at 147.175 and end up the day nearby at 147.10. Resistance for Wednesday is at 147.35 and then the rising 200 DMA now at 148.20. If price stalls at resistance, a dip to support at 146.20 and then the midpoint (145.3625) of the Tuesday range is possible.
The February Lean Hogs contract stumbled to start the New Year as traders took price back towards support at the 200 DMA (70.375), making the session low just above it at 70.675. Fridays trade took price to a new high (72.45) for the move before crumbling and ending the day at 71.60, just off the low (71.575). The follow through to the downside put the Hogs back into the lower end of the trading range for the past 5 sessions. It has formed a ledge and a breakout above the high could lead to a test of resistance at 74.125. A breakdown from the December 26th low (69.90) could lead to a test of support at 67.90.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, January 4th, at 3:00pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
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Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.