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Agricultural

Hog Relapse Meets Recent Range Base; Tighten S-T Bear Risk

Posted 12/12/2017 11:54AM CT | RJO Market Insights

Yesterday’s sharp break below Fri’s 67.85 low reaffirms the bearish count discussed in 01-Dec’s Technical Blog and leaves yesterday’s 69.12 high in its wake as the latest smaller-degree corrective high the market now needs to sustain losses below to maintain a more immediate bearish count. Its failure to do so will confirm a bullish divergence in short-term momentum that, from the extreme lower recesses of the past month’s range, will expose another intra-range rebound that could again test its upper recesses. In lieu of such 69.12+ strength AT LEAST the intermediate-term trend is down with the market just spittin’ distance from 16-Nov’s 66.27 low, the break of which could unleash sharp, extended losses thereafter. Per such 69.12 is considered our new short-term risk parameter from which a still-advised bearish policy can be objectively rebased and managed by shorter-term traders with tighter risk profiles.
Live_Hogs_Feb18_60min_Chart
Live_Hogs_Feb18_Daily_Chart
Only a glance at the daily log chart above and weekly log close-only chart below of the Feb contract is needed to see two things:
1. there are NO levels of any technical merit below 66.27 (think abyss)
2. our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC remains historically frothy at 84%.
It wouldn’t take much from here for the market to break that 66.27 low and have the managed money community be forced into capitulating this increasingly costly and painful exposure. The same thing holds for cattle. For a comparison, check out the Mar silver contract where such a capitulation is in full swing. This is the kind of collapse that could be seen in both hogs and cattle until these market’s break their clear and present downtrends with confirmed bullish divergence in momentum above levels like 69.12.
In sum, a bearish policy and exposure remain advised with strength above 69.12 required to threaten this call enough to warrant its cover. In lieu of such 69.12+ strength, further and possibly steep, accelerated losses straight away are expected.
Live_Hogs_Feb18_Weekly_Chart

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