Live Cattle: A Head & Shoulders pattern is believed the same as the final 3 waves of a bull market, combined with the first 3 waves of a bear market. Although in a fledgling state, the current chart pattern on fat cattle appear as a good start to a head and shoulders pattern. Via the October contract, the left shoulder, neck line, and head have already formed. The right side of the neck line is believed currently forming. In a perfect world, this would suggest to anticipate a decline to the March 9 low, and then a return to around $235.00. At present, October closed at the $235.00 area. This prompts the question, do you get all you need done now, or wait to see if the H&S pattern offers a higher price, sometime in the future? For argument's sake, let's say the H&S will be formed. This then leads to, will the neck line on the right be as low, or lower than the left? If the neck line is formed, then does the price move back to the level of the left shoulder, or fall short of?
An observation is that the beef/cattle industry is shifting from the center of the plate, up. Consumers are being impacted by inflation, more so recently with commodity inflation, and it is starting show up at the grocery store shelf in features on high end cuts. Grocers and restaurants are shifting in ways to maintain customer loyalty, but not necessarily with beef. Packers and cattle feeders are both losing money and cattle feeders last week paid tip top for incoming inventory. So, with the center of the plate being impacted by multiple factors of inflation, losses mounting towards producers, and the widest projected negative margin being entered into last week, cattlemen have their work cut out for them in managing these factors that will impact the price of beef and cattle. I recommend you take the Head & Shoulders chart pattern to heart and make marketing decisions based upon this pattern.
Feeder Cattle: Traders in the feeder market have already overlapped what is believed the left shoulder. As above, whether the right shoulder comes back up to this level, higher, or lower, is the question at hand. The formation of a head and shoulders pattern, in a pretty wide price range, is expected to unfold. If follows the timeline depicted below, this may be a marking of time through the summer that would allow for more or less evidence of expansion and when, or if, new inventory will be made available to work with. Until then, due to Mexico and Canada riding on the coattails of US cattle producers, too much processing and production capacity in the US, and demand seemingly stabilizing, producers may have bitten off more than they can chew with the new width of projected negative margins assumed last week.
Corn: All were higher with wheat and beans leading the way. Bean oil took charge and made new contract highs today. This helped pull beans higher, but the story is believed more about drought and specifically in the Mississippi River region from south to north. Although both corn and beans are grown in this region, beans are more predominant. Wheat is believed caught up in the drought as well. KC wheat has continued to lead the way, but Chicago remains hot on its heels. I continue to anticipate all going higher with beans and wheat the leader.
Energy: Energy was higher today. I anticipate energy to continue higher. Diesel fuel is in great demand and world supplies have been hampered. I continue to anticipate a new contract high, unfortunately, that would most likely mean an escalation in the middle east. The above is from yesterday with no need to change.
Bonds: Just because core inflation is hot, the rate of increasing, and now commodity inflation roaring, does not mean that rates will go up. The President wants lower rates and is believed installing those into power that will help him to achieve such. Injecting money into the system, elevated quantitative easing, and now commodity inflation would suggest to raise rates, but the debt being incurred is substantial, along with the previous debt inherited, making it more difficult to meet the interest payments on the debt. Hence, lower rates on the short end to be able to pay the mounting interest.
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
This is intended to be or is in the nature of a solicitation.” Futures trading is not for everyone. The risk of loss in trading futures can be substantial; therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not indicative of future results, and there is no assurance that your trading experience will be similar to the past performance.
