RJO FuturesCast

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Agricultural

Beware Range-Center Cattle Chop While Hog Bull Continues

Posted 01/17/2018 8:52AM CT | RJO Market Insights

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

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