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“Shootin’ The Bull”
Commodity Market Comments
by Christopher B. Swift
November 15, 2017
I will be traveling Thursday and Friday. I won’t be able to produce a mid day cattle comment or “Shootin’ the Bull” commentary. Chris Winward and Melissa Adkisson will be manning the helm. The softer opening was replaced by a firm tone at the close. Whether “the” low or not, the basis spreads and spreads between contract months were most likely a little out of line in comparison to what they had been. What is really interesting today is that what worked last week in the cash trade may have backfired this week. Once trading broke lose today, the futures gained ground. This is most likely due to the shortened kill week purchases behind us now and focus on full week kills and further demand going into the Christmas season is now the focus. It is not that I anticipate a roaring rally out of here, but more that this correction may have already shown its hand as to the extent of the price decline. October retail sales were slightly elevated. Another sign the consumer has discretionary funds to spend. Something to keep a close eye on is the oscillator on the daily chart. No contract month has had the oscillator to trade back below the zero line in this move down. Not to say it won’t, but if it does not, and we begin to reverse higher in earnest, it will be an excellent clue that the major wave 3 remains intact. All of the contract months on the hourly charts have begun having the oscillator moving back towards the zero line. Were I to get back friendly the fat cattle, I would suggest looking at the summer and next fall months to own. The June is on my radar the most as it is this winter I anticipate fewer cattle to be placed. With basis near even, I would anticipate the futures to push basis negative and hard at the start of the year.
The oscillator on the feeders have not traded below the zero line on the daily charts either. A turn up from here would suggest to anticipate a thrust of significance higher. Feeders appear to have made a 5 wave move down. This could be an A wave or a completed A-E declining correction. It could be a lot of things, but in the bigger picture, the decline is perceived as a correction with the next most probable move back to the upside. This could be the low for this move, but not necessarily the end of the correction. Time is just as much of a correction as price. So, this correction could last into next week. The on feed report may or may not have much influence on the market. This is because regardless of what the October placements are, November, December, and January are all anticipated to be lower. Marketing’s are anticipated to remain high as demand continues to foil the best laid plans by the bears. I think it will be nearly impossible to meet or exceed the placement level seen in 2017. There could be a few months with an even number, but I think it difficult to exceed many of those months of ’17. So, while prices remain soft, I continue to urge yard managers to consider a maximum price they would like to set for future inventory. The calls were only soft today and it appears option writers weren’t willing to assume as much risk as in the past couple of days. The offers remained elevated on the calls with few trading. There is not a very good price above that would suggest a reversal was immanent. So, again, maybe more time is needed to help the timing of a resumption of the main trend.
Energies were soft today. Of interest is that some of this decline appears to be on the heels of another Saudi shakeup. I know little about all of this, but seemingly the rally was disrupted by something that is not a supply/demand factor of the product. Therefore, once this issue is resolved, I would anticipate energy prices to begin trading higher again.
S & P 500 Stock Index:
The three big indices have all set a new low in this decline from the historical high. The oscillator is moving lower at a greater rate. With 25% plus gains on the year, some may be quick to bank as much of this gain as possible before years end.
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