“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/17/2024

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Live Cattle:

Tuesday's livestock comment:  Listen HERE.

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Price action today didn't seem to impress anyone.  There remains some indecision and skepticism as to what the next most probable move is going to be.  My analysis continues to suggest further triangulation of price with the next most probable move a test of the down trend line.  This would put the June contract back to the $184.00 area.  The market that caught my attention today is the February '25 live cattle.  If you believe that cattle numbers will only get shorter, then why not own contract months in which time would suggest even fewer cattle to work with.  As well, were expansion to begin in earnest this summer or fall, then by the September time frame, placements have the potential to be significantly less.  Now, whether the current agenda will be strong enough to cause some resistance to this is unknown as of yet, but that would be the undoing of any further rallies in cattle.  So, while it may seem as if I am contradicting myself, agenda to keep cattle prices from soaring, yet showing potential for further price advances, is really just part of the triangle. At some points in time, the agenda will have a greater impact and at others, the short supplies will produce a greater impact on prices.  One thing is for sure, none of this is as clean, cut, and dried as some of the bulls have made it out to be.  

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I recommend buying the February '25 live cattle with a sell stop to exit only at $178.90.  This is a sales solicitation. 

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Feeder Cattle:

Rally and plateau seems to be the first few steps in the feeder market.  This minor pattern leads me to anticipate a higher trade in the feeder cattle with expectations of the down trendline of the triangle to be tested.  The 34 day moving average is trending lower and currently at $260.42 August.  The down trend line is at approximately $268.00 if challenged sooner than later. So, somewhere between the two, or potentially all the way back to the top is now expected for the feeder cattle.  I think with the index starting to reflect some skepticism within the cattle feeding community, and the Fed's attempts to quell inflation causing consumers to shift uncomfortably in discretionary spending, it will be difficult to challenge the historical high without a dramatic change in the money supply for producers, or a significant reduction in restrictions on production.  For those that intend on being in the business for years to come, I would anticipate that sometime within the next two years, enough vertical integration has formed that would potentially attract investment in sectors.  Until then, I expect the industry to continue to grapple with money and the restrictive limitations by government. 

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Hogs:

Summer hogs are believed going into convergence of basis.  While the speculative trades have been wrong, the hedge recommendations will continue to produce the higher price over the index, or the index will have to rise significantly more to converge basis. So, either way, a $20.00 basis had been secured with the fence options strategy, as well as, offered approximately $10.00 more were the index to have reached the short call strike price.  

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Corn:  

Grains and oilseeds are lethargic and seeming as if they are ready to tip lower.  Seemingly, it is very difficult to make a marketing decision at this point in time.  I am unsure why as there are options strategies, with very low premium outlay's that could increase your marketing capability, regardless of price direction.  I continue to recommend getting busy and get some marketing done now, instead of later.  This is a sales solicitation.  

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Energy:

Energy plummeted today.  Crude and the products were all down more than 3% today alone. I continue to expect energy to trade higher unless there is evidence that the Fed's rate hikes and current bout of inflation are impacting consumer spending. We have not seen evidence of this yet, but potentially it could be coming in the next report.  Energy moving lower and bonds higher would be a tell tail sign that the inflation is subsiding. So, while I may continue to be friendly towards energy, I do see the opportunity for inflation to subside and potentially push energy prices lower. Of the most interest is that diesel fuel was the weak link in the rally, and now with some weakness showing up, it has broken up trend lines and exceeded previous lows, suggesting that diesel fuel is really weak.  This suggests our infrastructure of manufacturing and transportation is weakening.  As well, gasoline has been the leader, and this is the fuel source of the consumer.  Since we already believe the consumer is being impacted, a change in direction of gasoline prices could be the evidence needed the Fed's work is showing some results. 

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Bonds:

Bonds were higher today and did not exceed Tuesday's low.  A trade above 115'00 June will lead me to, again, believe the wave 2 correction complete with a major wave 3 rally anticipated.  If you wanted to place more money on deposit for a rate of return, the rates are the second highest in 15 years.  Get that done sooner than later. Equities continue to leak after the "pop" heard two weeks ago.  A significant swap could take place between equities and fixed income derivatives.  Equities are at the tip top still and interest rates as well.  

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This is intended to be or is in the nature of a solicitation. An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of the margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.