As cattle traders seek direction in a confusing market, nothing seems to fill the bill.
Fundamental indicators aren’t performing as they should, and charts aren’t any better at providing clarity. What’s a trader to do?
For the last month, the Oct futures contract’s price and open interest basically have been moving sideways, which doesn’t help. Most of the rules about what open interest is saying don’t cover flat open interest trends in sideways price patterns. They need open interest to be moving up or down, not sideways.
In general, though, traders get nervous when markets get shiftless, and prices tend to soften. The most-active Oct contract, since open interest flattened in mid-July, rose to a high of $149.80 per cwt on Aug. 8 from its low on July 27 of $143.30.
However, since peaking, the contract has fallen back to a trade in the upper half of that range. It can’t seem to muster the strength to resume the rally as it has trouble extricating itself from a cluster of moving averages.
OTHER TECHNICAL INDICATORS
Cash cattle and wholesale beef markets aren’t providing traders with the strong directional signals the market desires either. Beef, while up seasonally, refuses to pop, and cattle can’t get over a tepid beef market.
In cases like this, many traders turn to technical indicators to give them something to go on. Barchart provides some signals on its web page that point to a near-neutral stance on prices going forward.
Barchart’s short-term price indicators are giving a sell signal from the 7-day average directional indicator and the 20- 50-day MACD Oscillator. Buy signals are coming only from the 20-day moving average vs. price comparisons, while the 20-day Bollinger Bands are giving a hold signal.
Overall, the short-term indicators are giving a 40% sell signal.
The company’s medium-term indicators are a little better, giving a buy signal from one directional indicator, a hold signal from another and sell signals from two more. Overall, the company’s medium-term indicators give a 25% sell signal.
Barchart’s longer-term indicators are showing an overall 67% sell signal with one indicator giving a hold signal and two others, including the 100-day moving average, giving sell signals.
All in all, the technicals are at a 48% sell, which is pretty even.
It’s no wonder cattle traders all over are confused about where the market is headed.
The Commodity Futures Trading Commission’s Commitments of Traders report showed that the larger speculators have been getting out of their long positions for the past month. This means that while total open interest has been holding steady, the long positions of small speculators must have been expanding since open interest can’t hold steady without other traders taking up the position.
So if those smaller traders get nervous and decide to move to the sidelines, open interest would decline.
If open interest begins to decline while prices are holding steady, it’s a bullish signal as weaker traders extricate themselves from the decision-making mix.
CASH CATTLE MARKETS QUIET
Cash cattle markets remained quiet Monday with no bids or offers reported across the Plains. Bids were expected to start around $146 per cwt with asking prices nearer $152.
Cattle traded lightly last week, with cattle selling at $148 to $152 per cwt on a live basis, steady to down $2 from last week. On a dressed basis, cattle last week sold at $240, up $2 to $4.
The USDA reported higher boxed beef prices Monday with choice up $0.80 per cwt at $245.52 and select up $0.95 at $236.39. Volume was moderate with 96 loads of fabricated cuts sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $216.50 per cwt, down $0.21, compared with Monday’s Aug futures contract settlement of $214.40, up $0.50.