Cattle Hold Bullish Short-Term Tone

Live cattle futures prices currently hold a bullish short-term tone, but there are technical and fundamental factors that may be worrisome to traders with bullish ideas of market direction.

The most-active Dec live cattle futures contract this week moved higher overall and remains above some key chart support lines going into Friday’s trade.  However, there are some other factors that could lend pressure to the market.

The Dec live cattle contract Thursday settled at $106.97 per cwt, up $1.57, or 1.49%, from $105.40 last Friday, Sep. 9, and up $5.70, or 5.63%, from the contract low set only 1 ½ weeks ago on Sep. 6.

Along the way, it surpassed the 10-day moving average, which begins Friday trade at $104.89, and the eight-day exponential moving average, which begins Friday trade at $106.02.

And by moving higher this week, the market reduced a significant portion of the volatility built into the market over the last three months.  The 20-day Bollinger Bands range from $101.38 on the low side to $113.44 on the high side, a spread of $12.06.

Thursday’s close remained above those key moving averages, and there is more volatility to be removed from the market.  Both could be construed as adding support to prices.

Additionally, cash markets have not traded to any degree yet, and many traders expect to see a bit of a bounce from last week’s $5-per-cwt drop.  The USDA reported one sale of 245 steers weighing 1,500 pounds at $107 this week, which would be up $2 from the bulk of last week’s sales at $105.  Further action at this level could provide a bit of support for another few days of futures bullishness since $107 is only slightly above Dec’s Thursday settlement and the nearby Oct settlement Thursday of $106.95.

 

NOT EVERYTHING IS ROSY

 

However, the live cattle market is anything but roses for bullishly construed traders.

Thursday’s trading action left a “shooting star” on candlestick charts, a potentially bearish signal.  The formation shows a small difference between the opening and closing prices (which forms the body, or candle, of the formation) with a daily high that is enough above the body to make what looks like a shooting star.

The formation actually shows indecision on the part of traders.  Bulls are hesitant to take the market much higher, but bears don’t have the conviction to take prices any lower, and since bulls must be fed, markets often turn lower after one of these formations.

But candlestick traders will await confirmation of the signal in the following day’s, or days’, trade before making a decision based on the formation.

Western chartists will be concerned about taking the market higher as well since the cycle low of July 21, at $106.95 per cwt appeared to provide resistance this week.  It took four tries to close above this mark, and even then, Thursday’s $106.97 close could hardly be called decisive.

 

CASH CATTLE MARKETS QUIET

 

Cash cattle markets Thursday were quiet.  One trade was reported this week at $107 per cwt after trading last week $5 per cwt lower on a live basis at $105 and $9 lower on a dressed basis at $166.  Bids were about $104 live with asking prices around $110.

The USDA’s choice cutout Thursday was $0.47 per cwt higher at $186.27, while select was off $1.49 at $178.83.  The choice/select spread widened to $7.44 from $5.48 with 151 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $133.49 per cwt, down $0.87.  This compares with the Sep settlement Thursday of $133.97, up $1.30.