RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Agricultural

Cattle Takes Next Peak/Reversal Step

Posted 03/12/2019 10:55AM CT | RJO Market Insights

Today’s impulsive break below 05-Mar’s 128.10 initial counter-trend low reinforces our peak/reversal count introduced in 04-Mar’s Technical Blog and that warns of potentially significant losses in the period ahead.  This resumed weakness and confirmed intermediate-term downtrend leaves Fri’s 129.875 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recovery above to render the sell-off attempt from 01-Mar’s 130.45 high a 3-wave and thus corrective event consistent with a still-developing broader bullish count.  In this regard we are identifying 129.90 as our new short-term risk parameter from which a new bearish policy can be objectively based and managed by shorter-term traders with tighter risk profiles.

Live Cattle Apr '19 Daily Chart

Live Cattle Apr '19 Daily Chart

Contributing mightily to this peak/reversal threat that we believe could be major in scope are the following factors:

  • a confirmed bearish divergence in daily momentum (above)
  • an arguably complete 5-wave Elliott sequence from at least 13Nov18’s 118.55 low
  • the market’s proximity to the extreme upper recesses of the past couple YEARS’ range amidst
  • historically frothy sentiment/contrary opinion levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC

Indeed, at a whopping 89% this week reflecting 174K long positions to just 18K shorts, it’s not hard to find fuel for downside vulnerability should the market force the capitulation of this extraordinarily skewed bullish exposure.

Live Cattle Weekly Chart

Finally, the monthly log chart of the most active contract below shows the market’s position at the extreme upper recesses of the past 2-1/2-year range where it has had NO success in sustaining uptrends.  If a broader base/reversal count is still unfolding, all the bull’s gotta do now is recoup 01-Mar’s 130.45 high and maintain trendy, impulsive behavior higher.  And this would start with a recovery above our short-term risk parameter at 129.90.  Until and unless the bull provides this strength, the facts listed above are clear and present and warn of a correction or reversal lower that could be major in scope.

These issues considered, traders are advised to move to a new bearish policy and exposure from at-the-market (127.75) OB with a recovery above 129.90 required to negate this call, warrant its cover and re-expose the major bull.  Until such 129.90+ strength is shown, further and possibly protracted weakness should not surprise straight away.

Live Cattle Monthly Chart

RJO Market Insights