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June fat cattle saw a choppy trade last week with a 4.55 range to finish the week down .15 from the previous week. May feeders saw similar price action, trading in a 5.50 range and finishing down .95 for the week. Position squaring and a little “bullying” ahead of Friday’s Cattle on Feed report played a role in the chop fest. Friday’s Cattle on Feed report was in line with expectations. On feed came in at 107.4, the range of expectations were 106.5-108.1; this is the largest read for April in 12 years. Placements came in at 90.7, the range of expectations were 84.8-93.8; this is the second largest March placement number in 11 years. Marketing’s came in at 96.1, the range of expectations were 95.0-96.3. You could make the argument that the report is friendly; we would say so just because it wasn’t bearish (silver lining).
The market was disappointed in early cash trade last week at 121 despite the wide basis. The sentiment changed Friday after the close with 124 trading in Ne, Co, and Wy. We would expect to see this support prices early on Monday. Friday’s Commitment of Traders report showed that managed money were net sellers of 45 live cattle futures, this puts their net long position at 22,656. On the feeder cattle futures they were net sellers of 240 futures, putting their net short at 2,855 futures. Keep in mind that this is data is for April 10th-April 17th.
Fat cattle futures ping ponged against some very pivotal levels last week to finish near unchanged. The market attempted to breakout above our resistance pocket from 106.05-106.925 but could not attract enough buying interest to do so. The failure to breakout encouraged some bullish traders to reduce exposure which led to a domino effect. The market retreated hard but managed to hold what we referred to as “significant support” 101.20-101.85. This was a great opportunity to look long on the first test. Each time a level is tested it loses its significance so another run at that support pocket would not be a good sign for the bulls. The same thought process is applied on the resistance side. We feel confident that another test of that resistance pocket will give way to an extension towards 109. Higher lows and higher highs were made for the week which has us optimistic about the first half of this week’s trade.
Feeder cattle futures had a nice reversal on Friday, we are anticipating seeing that momentum carry over into the Monday open. As with the fat cattle, feeders managed to mark higher lows and higher highs for the week which is encouraging for the bull camp. With that said, there are several barriers up near those highs. 142.65-142.70 will be first resistance next week with several more significant barriers from 143.35-144.45. This pocket includes the 100 and 200 day moving average, previously important price points, and the 50% retracement from the November highs to the April lows. Shorter term moving averages are working below the longer-term ones which is often looked at as bearish and has earned the nickname “death cross” (50 and 100 day moving averages crossing below the 200 dma).
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