Be advised that all my comments are my OPINION and that OPINION is based on my long term in-house model that I dubbed LAWG 647. The prices I use in my model are week ending prices, usually Friday.BTW, trading commodities is risky and not meant for those that faint at the sight of blood.
September 28, 2020
WHAT DOES A FEEDER CATTLE TREND CHANGE MEAN TO FATS?
Rarely do I write about Feeder Cattle, the high required margins hurt the trading participation in the Feeder Cattle market.
This week is different as the LAWG647 Model indicated that the November Feeder Cattle turned bearish last Friday, the 25th of September. Looking back the Feeder Cattle market turned Bullish on the week ending July 10, two months after the fats turned bullish. I think one can argue that it was not until Feeder Cattle turned bullish did the Fat Cattle become energized to the top side. What does the Model tell us?
November Feeder Cattle turned Bearish last Friday. It will take a close at or above $144.80 to return to a bullish trend. Be mindful that November Feeders closed on the 25th at $140.15, so Feeder Cattle are within striking distance of a trend reversal.
Should November Feeder Cattle be unable to reverse the trend on October 2, the critical level for October 9 will be at least $146.82 if not greater. Both the Negative and Positive Indicators are within the First Standard Deviation of the long term average, meaning if there is plenty of room for Feeders to move lower should the downtrend be confirmed. What do we know about December Cattle?
The LAWG647 Model tells us that December Cattle are by definition in an uptrend. It will take a close at or below $109.32 on Friday, the 2nd of October to turn bearish. Should December Cattle be unable to reverse the trend on October 2, the critical level for October 9 will be at least $111.55. Both the Negative and Positive Indicators are within the First Standard Deviation of the long term average, meaning if longs and shorts are pretty balanced. It will take a close on Friday October 2 at or above $112.67 to re-confirm Fat Cattle bull market. Like Feeders, December Cattle are well within reasonable striking distance of reaching the critical $112.67.
What to do? I am recommending for the speculator to consider selling December Cattle at $112.90, but don’t bet the farm. If you are still short on Friday liquidate if closes at or above $112.67, but again don’t bet the farm during the week.
Lee Gaus is a founding partner of EFG Group founded in 1992 which specializes in servicing Introducing Brokers. Prior to founding EFG Group Lee Gaus, Tom Fritz and Steve Erdman all began their Commodity Futures careers with ADM. Collectively Lee, Tom and Steve have over one hundred years of experience in the industry.
International Futures Group (IFG) founded in 1994 is a sister company to EFG Group specializes in serving institutions, professional traders and individual investors.
We believe our experience and the development of the Model provide our clients, Introducing Brokers and individual clients a unique perspective. If commodity trading is what you do drop me a line at[email protected]or give me a call at 312-384-1166, or 1-877-304-1369. We will be glad you called and are confident so will you.