Breaking: Coronavirus has created a risk-off atmosphere in the global markets, spilling over into commodities. Trying to quantify this right now is impossible, so it is sell first, ask questions later. China is also on holiday, so demand this week is expected to be slow. The third part of the trifecta is that Bernie Sanders is surging in the polls. Regardless of your political ideology, this is being under reported as a catalyst for the stock market pulling back, adding pressure on certain commodities and changing the overall flow of money.
Live Cattle (April)
April live cattle got taken to the woodshed for the second time in three sessions as fears of coronavirus trigger additional long liquidation from the funds. We have been leaning on the short side and are still pressing that angle. We are expecting to see follow through pressure and that could take us near and possibly below 120. The 200-day moving average comes in at 120.375 and the 50% retracement (middle of the range) comes in at 118.975, both points need to be in the back of your head. If you’re bearish and have been short, these are potential exit points. If you’re bullish, these are points to consider getting long exposure on. If you don’t know what you are, don’t trade, cash is a position. Money-flow can exacerbate things to the upside and downside, taking the above or below fair-value, so be sure to manage your risk appropriately.
Resistance: 124.55-125.10***, 127.90-128.55***
Support: 120.375**, 118.975****
Feeder Cattle (March)
March Feeder cattle rolled over again today, taking us to prices not seen since September. The market has been slicing through all technical levels, which isn’t a surprise with current market conditions (volatility breeds volatility). There is a gap on the chart going all the way back to September 20th, this comes in from 133.25-134.20. This pocket also contains a key retracement. We would not be surprised to see this pocket tested and hold some sort of relief rally. How long that relief rally will last is an unknown, could be a few minutes, maybe a few days, but we will likely find out soon.
Resistance: 138.80-139.25****, 140.80-141.125**
Lean Hogs (April)
Lean hogs got their knees taken out with coronavirus creating a risk-off atmosphere in the global markets, ie: Sell first, ask questions later. What type of affect this will have on agricultural commodities is impossible to quantify at this point in time. April hogs tested the low end of the November and December’s range, recovering off the lows. There is a bullish seasonal that starts today, it is as follows: Buying August lean hogs on January 27th and liquidating on February 27th has been profitable for 13 of the last 15 years, the average gain being roughly $1.70; the bulls have their work cut out for them. The bears are in the drivers seat and a potential retest to the August lows is not out of the question, 68.45. Resistance that the bulls need to reclaim on a closing basis comes in from 72.00-73.05, the gap from the open.
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