Beware Range-Center Cattle Chop While Hog Bull Continues

January 17, 2018 8:52AM CST

FEB CATTLE
The hourly chart below shows that the potential for a bullish divergence in short-term momentum is developing nicely, but strength above last Wed's 118.525 corrective high is required to CONFIRM the signal to the point of non-bearish action like short-covers and cautious bullish punts. The fact that this momentum issue has developed around a key 117.575-to-118.25-area of former support-turned-resistance would seem to contribute to the importance of this area as a one around which directional biases and exposure can be more effectively based and managed.
live_cattle_feb18_60min_chart
On a broader scale the daily log scale chart below shows that 04-Jan's 123.65 larger-degree corrective high remains as the key risk parameter this market still needs to recoup to break the downtrend from 06-Nov's 131.95 high. Recovery attempts shy of 123.65 are still advised to be approached as corrective selling opportunities for longer-term players. But it's also easy to see the pivotal nature of the 117.55-area defined by 11-Dec's low and the market's wavering behavior around it.
live_cattle_feb18_daily_chart
live_cattle_feb18_weekly_chart
Perhaps the greatest challenge heading forward is what could be greater odds of aimless whispaw risk now that the Feb contract has returned to the middle of a range that dates back eight months while the market in general- on an active-continuation chart basis shown below- has returned to the middle-half of the past YEAR'S range. Flip a coin.

Under such range-center conditions a more conservative approach to risk assumption is preferred, and herein lies the benefits of identifying a tighter but yet objective risk parameter like 118.55. In sum, a bearish policy remains advised with a recovery above 118.55 required to warrant a move to the sidelines by shorter-term traders and for even longer-term players not will to risk short exposure to 123.65 to pare bearish exposure to more conservative levels. In lieu of such 118.55+ strength further losses should not surprise.

live_cattle_weekly_chart


FEB HOGS

hogs_feb18_daily_chart
Yesterday's poke to yet another new high leaves last Thur's 70.72 low in its wake as the latest smaller-degree corrective low this market is now required to sustain gains above to maintain a more immediate bullish count. Its failure to do so will confirm a bearish divergence in momentum, break the uptrend and expose a larger-degree correction or reversal lower. Still-frothy bullish sentiment levels would contribute to such a peak/reversal count IF/when the market confirms the bearish divergence in mo required to render sentiment/contrary opinion an applicable technical tool.
hogs_feb18_weekly_chart
On a much broader monthly scale and per the most active futures contract however, the market remains deep within the middle-half bowels of a range that dates back three years and where continued aimless whipsaw risk must be acknowledged and prepared for. Herein lies the importance of a tight but objective risk parameter like 70.72.

In sum, a bullish policy and exposure remain advised with a failure below 70.72 required to threaten this call enough to warrant its cover and circumvent the depths unknown of a slightly larger correction or more significant reversal lower. In lieu of such sub-70.72 weakness further and possibly accelerated gains should not surprise.

hogs_monthly_chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.