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Commodity Futures News and market recap
LEJ8: -.30 at 112.10, trading in a range of 1.575
LEM8: -1.20 at 99.75, trading in a range of 2.275
GFJ8: -1.225 at 130.65, trading in a range of 2.55
GFK8: -1.475 at 130.90, trading in a range of 2.75
Cattle Commentary: It’s the same story, just another day in the cattle world. Futures continued lower as funds continue to liquidate their net long positions. Cash bids this morning started to surface at 117 and 118, those were met by sellers and bids started dropping; the bulk of today’s cash trade came in at 117. This slow bleed lower continues to offer false hope to any longs left in the market, bulls want to see more panic and capitulation to start forming a bottom, tops and bottoms are a process not a point. Margin call selling continues to add additional pressure into the close. Buying the close and selling the open has been the recent trend, we will see if can continue into tomorrow’s session. Boxed beef was lower on the day.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 219.68 / 209.33
Change from prior day: / (.12) / (1.17)
Choice/Select spread: / 10.35
Live Cattle (June)
June live cattle filled the gap at 99.75 that was left on the charts exactly 1 year ago, we listed this as first support in yesterdays report. A break and close below opens the door to 96.375, this would be a full retracement of the March lows; we have been using those lows and the November 7th highs to derive our retracement levels. At this point we would like to be more aggressive on the buy side, until then we recommend treading lightly. The chart is a technical graveyard and the bulls have A LOT of work to do before you can claim a bottom is in. If you want to be long the market that’s fine but be mentally prepared to see lower prices. The other option would be to buy options (no pun intended), there are some attractive opportunities in that market. When we do get a relief rally we are expecting it to be fierce and probably short lived as we would expect it to suck in buyers, giving funds the opportunity to continue to offload at better prices. The RSI (relative strength index) after today’s close is showing a 14 handle.
Resistance:101.85**, 102.35-102.575**, 106.00-106.45**
Support: 96.40-96.75****, 92.70-93.05***
Feeder Cattle (May)
May feeder cattle are officially in uncharted territory with today’s session taking out the June lows at 131.50. Using the continuous charts, we would look at 129.05 being the next line in the sand. The RSI (relative strength index) is currently at 24.15, which is “oversold” but is not as oversold as we were just two weeks ago. We do not advise trying to catch a falling knife, bottoms are a process not a point. First technical resistance for the rest of the week will come in from 133.55-134.15, a close above this could encourage additional short covering, but bulls will want to temper their expectations as the bears remain in full control.
Resistance: 133.55-134.15***, 139.275-140.25***, 143.15-143.50****
Support: 128.90-129.05***, 124.85-125.90****
Lean Hog Commentary and Technicals (June)
June lean hogs finished the session down 2.00 at 71.55, trading in a range of 2.65 on the day. Despite the continuous pressure, the RSI (relative strength index) is only at 30 which is just the beginning of what is generally accepted as “oversold”. Tariff talk continues to bring pressure on the market and we could see that extend as funds are now net short the market. We believe there will be an opportunity to the buy side in this market, but you will want to use patience. The next significant level we are looking at doesn’t come in until 66 so be mentally prepared of things to get worse before they get better.
Resistance: 72.95**, 75.475**, 77.875-78.175***
Support: 70.50****, 66.00****
Session close: Settled at 1.2335, down 33 ticks
Fundamentals: The Euro slumped for the fourth session in five and traded to the lowest level since March 1st. Price began retreating from the overnight high of 1.24035 on a string of poor data reads. First was German Retail Sales which was followed by overall soft reads on Manufacturing PMI. The Dollar continued its week-long recovery as analysts point to a stronger risk appetite. Minneapolis Fed President Kashkari said this morning that “rates are near neutral” calling for not many hikes from here. However, he pointed to a range of opinions on the committee. Though Kashkari dissented all three times last year, he does not have a vote this year. Fed Governor Brainard who is a voter, is speaking this afternoon and kicked off warning of high asset prices even after this current correction. She added that trade policy is a “material uncertainty to economic outlook”. Even with the string of Manufacturing reads out of Europe this morning, today’s calendar took a backseat to what tomorrow has to offer. Eurozone CPI is due at 4:00 am CT, U.S private ADP Payroll is due at 7:15, St. Louis Fed President Bullard speaks at 8:45 along with the release of Markit Composite and Services PMIs. ISM Non-Manufacturing and Durable Goods Orders are due at 9:00 am CT and this will headline the morning. We view the data through the back half of the week as a tremendous hurdle for the U.S Dollar.
Technicals: Price action nudged first key support but did manage to ultimately stay above this level that aligns multiple indicators with previous lows. The near-term technicals have been weak but not destructive. We remain very upbeat in the intermediate and long-term and do not believe the high of the year for the Euro is in. First resistance at 1.2427 becomes a bigger hurdle after today’s fail; we must see a close out above here in order for the tape to turn positive.
Resistance: 1.24035-1.2427**, 1.2475-1.24915**, 1.2547***, 1.2659***, 1.2725****
Support: 1.23235-1.2349**, 1.2254***, 1.2040-1.2079***
Session close: Settled at .94275, down 66 ticks
Fundamentals: The Yen posted a poor session as equity markets rebounded strongly and the U.S Dollar continues to hold solid ground. However, much of the losses in the Yen came overnight and purely on the fact that equity markets did not collapse. Furthermore, this helped turn sentiment towards mediocre data out of Japan on Sunday night. The real rip in equity markets did not come until late in the session and the Yen showed little reaction. It will be crucial to see if there is follow through in the currency in Asian hours after Nikkei futures finished the electronic session up nearly 2.5%. There is no major data out of Japan tonight.
Technicals: The Yen failed to hold first resistance at .9498-.9504 before retreating sharply. This move is discouraging and points to lower price action, because of this we are Neutralizing our Bias. Still, major three-star support comes in at .9393-.9410 and is gearing up for another test; a close below here will give the bears a clear edge and opens the door to the next wave of strong major three-star support. We remain long-term upbeat, but today’s reversal cannot go unnoticed. The 9-day moving average has been above the 21-day moving average since the first week of January and lower action tomorrow is likely to cross the two.
Resistance: 9498-.9504**, .9530-95415**, .96145***, .9729***
Support: .9393-.9410***, .9382*, .9310-.9342***, .9120-.9145***
Session close: Settled at .7681, up 28 ticks
Fundamentals: The Aussie traded higher ahead of the RBA Meeting last night after equity markets finished well and continued to edge higher early in the evening; the risk on trade was back in play. The RBA left rates unchanged as expected but was more upbeat on the economy and wages. This will place a tremendous emphasis on tonight’s Retail Sales data due at 8:30 pm CT. Also, due then are Building Approvals and Private House Approvals. China Caixin Services PMI is due at 8:45 pm CT.
Technicals: Fundamentals being overpriced-in helped the Aussie avoid technically falling off a cliff last night. Price action continues to hold what was major three-star support and is now a critical pivot at .7674-.7691. The bulls must achieve a continued close above here to keep the bears from quickly regaining an upper hand. Truly, the bulls can only get excited upon a close out above .7757-.7784.
Resistance: .7757-.7784***, .7848**, .7902-.7921**, .7986***, .8035**
Session close: Settled at .7818, up 77.5 ticks
Fundamentals: Today was a big session for the Canadian and we said yesterday that it has held so well, it is priming for a move higher. Not only did it get good news that the White House is pushing for a NAFTA deal as early as mid-April, but the risk-on trade swept through markets beginning last night and picked up in full-force late in the session. The Canadian has been extremely constructive and appears ready to follow through ahead of data Thursday and Friday.
Technicals: We said yesterday the fact that the Canadian is not failing at the .7771 level is becoming bullish. Today, it closed at the highest level since February 27th after breaking out from a bullish flag at the bottom end of its range. There is headwind at .7840 but we are looking to this as a new bull leg with room to run.
Resistance: .7840**, 7904-.7908***
Support: .7735**, .77075**, .7633**, .7550***
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