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June 25, 2020
CATTLE IN CRITICAL CONDITION, HOGS ON LIFE SUPPORT
When it comes to the Ag commodities at least the livestock sector is giving us some volatility. The fundamentals impacting the meats really have not changed.
- Covid-19 shuttered a number of kill plants
- Record month to month decline of 24% in cold storage of pork from April to May
- Restaurants closed down for months
- Hogs and Cattle backed up
- Chinese Hog imports impressive but not enough to underpin the market
So there you have it. Using my Model what I want determine what the present trend is for August Cattle and Hogs. What will it take to reverse the present trend and how likely is that trend reversal go take place in the near term. Let us begin with a look at the August Cattle.
AUGUST CATTLE CHART
- The Model referred to in the above paragraph tells us that August Cattle (LCQ) are in an uptrend, not a real strong one….yet but in an uptrend.
- LCQ will reverse to bearish if it closes at or below $91.10 on Friday June, 26
- The Positive and Negative Indicators are within the first standard deviation of the long term average. Neither over bought or oversold
- LCQ may not be in critical condition, but is at a critical point in time if the uptrend is to continue
- The Model tells us that is critical that LCQ penetrates and stays above $97.75
- Once above $97.75 a move then close to the $100.00 could give us the electrical charge needed to advance to the next critical value of $105.
- If LCQ cannot penetrate and stay above $97.75 the Model suggests that LCQ will roll over and head lower of its own weight.
So what does the Model tell us about August Hogs?
AUGUST HOG CHART
- The Model tells that August Hogs (LHQ) remains in a protracted downtrend
- LHQ will reverse to bullish if it closes at or above $63.40 on Friday June, 26
- The Positive and Negative Indicators are within the first standard deviation of the long term average. Neither over bought or oversold
- Hogs are on life support given the values needed in the near term to reverse the trend, as we can see by this week’s value mentioned in line two
- Without fundamental market news to alter the tenor of the conversation it is my opinion based on the Model the Hog market will remain in a bear market for at least four more weeks if not longer.
- China could be that fundamental factor, but that may be asking too much