Live Cattle: However hard I try to not swap horses in mid stream, there are times I just have to. Today was one of those times. Whether it indigestion or intuition, I remain unsure, but when the market gapped lower on the opening, my subconscious started firing off sell signals in my brain that I could not ignore. So, the decision to exit longs, or start getting short, was accelerated. I believe the factor that has been lingering in the back of my head was the disparity between the moves in fats and feeders. Fats have been stronger for the past several months over feeders. With April setting new contract highs and the other months knocking on the door of their's, it appeared that all that was lacking was a solid move higher in the feeder cattle. The gap lower and then overlapping of previous waves set the tone to get out of longs and potentially into shorts. In an attempt to keep from potentially making two mistakes in the same day, I chose to be more conscious of getting flat than short. Although I do anticipate fats to move lower, I think they will move lower the least. Both fats and feeders will be making a C wave decline if my analysis is now correct. Since the B wave of the fats was significantly stronger than that of the feeders, I don't anticipate as much of a decline in fats as I do feeders. More on them below. Other factors are outside market forces and the abbreviated trading weeks coming up. There is a great deal of news on the horizon this week and with Crude and equities hugging the lows for the year and bonds on the high for the year, there are some fireworks that could be displayed upon release of the FOMC meeting results on Wednesday of this week. Long story short, I really thought the industry was through with the gouge selling. After today, I think they'll pull this antic out of the tool box once more. What I don't anticipate is a huge move lower or it to be prolonged. A trade back to the November low per respective contract month and maybe lasting into the second week of January is my best guess at this time. A correction of 50% or more from last Thursday's high to today's or potentially tomorrow's low, I will be looking to make some sales of February.
Lean Hogs: Traders broke hog prices out of the triangles in every way fashionable. Although this does not change the major wave count, some of the same issues facing beef face pork as well. Due to the initial move down from contract high being 3 waves, I continue to anticipate a thrust of significance to the upside. However, the correction has worn me to a frazzle and that is exactly what this price action is supposed to do. If February hogs breech $62.00, then the intermediate wave count will be changed. I think where I am missing the boat in most of my trades is that the environment of all commodities remains in a multi-year bear market. Were commodities in a bull market, or at least not bear, the patterns that I am seeing would be believed to produce the outcome's I've anticipated.
Feeder Cattle: Last weeks strengthen faded like Samson in Delilah's the Barbers chair. On the mid day cattle comment, and update, I recommended exiting all long positions in feeders. I was hesitant to get short in fear of making potentially two mistakes in the same day. So, here is what I think now. I think the rally from the initial low on 11/13 is a major wave A. I think the irregular B wave started from the 11/13 low and terminated at the 12/13 high last week. When traders took prices below the A wave low, that is what created the "irregular" part of this correction. It also has a tendency to be more misleading as the second low could just as easily have been a 5th wave termination. As of now though, it is not. So, I anticipate a C wave decline in March feeders to approximately $136.80 were this leg to be short, or to $131.60 were the C wave to be equal to the A wave in price length. Yes, this is a pretty drastic turn of events in my analysis in comparison to what I have been anticipating. My objective as of now is to market March inventory at $144.00 on Tuesday if that opportunity presents itself. If not, then a trade down to $142.00 to $141.50 may be seen before a correction of significance unfolds. Two things on the forefront. One, if I happen to be correct, then this C leg down should unfold in 5 waves. Second, I don't think the 1st wave is complete yet, but could be within a dollar or two lower. So, don't get overly anxious if prices trade lower first or sometime through the day on Tuesday. The charts should help to clarify a lot of what may seem confusing in writing.
Corn: Grains were mixed again. The chart patterns on grains are not bullish. Since the lows made around 7/12/18, none of the grains have taken off to the upside in 5 wave patterns. Actually, what it appears is that corn and beans have made a large 3 wave move sideways. This pattern leads me to anticipate a move lower. November beans have my attention the most. There appears to be a 5 wave move up from the July 13th low to the December 12th high. The decline from the 12/12 high appears to be 5 waves down. A trade below $9.49&1/4 would lead me to anticipate a decline of some significance. Were traders to push November beans to anywhere above $9.58 Monday evening or Tuesday through the day, I will recommend selling November beans with a buy stop to exit only at $9.75, ***This is a sales solicitation.***
Crude: Crude is apparently not finished going lower. The splat that crude made when it hit bottom leads me to anticipate it melting further through the cracks instead of rebounding. Were energies to make another new low, I would be back on the phone again to my fuel provider to see how this decline can be captured for spring usage.
US Treasury Bonds: Bonds are back on track moving higher. With equities now showing no gains for the year as of this afternoon's close, some may be viewing the bond market as a flight to quality. I think that were a 5th wave new high close made on the March bonds above 143'16, I would knock even harder on my lenders door to get rates lowered on as much debt as possible.
Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com
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