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Dec Hogs Tread Water While Back-Month Bulls OK

Posted 10/21/2019 10:24AM CT | RJO Market Insights

DEC HOGS

Thur/Fri’s relapse below an admittedly minor corrective low at 67.95 confirms a bearish divergence in very short-term momentum that maintains the past month’s lateral range bounded by 30-Sep’s 72.72 high and 08-Oct’s 63.07 low.  These levels continue to represent our long- and short-term risk parameters, respectively.  The market’s position in the middle of this range maintains the odds of aimless whipsaw risk, so a neutral/sideline policy is advised for the time being.  A cautious bullish bias from this range’s lower-quarter would be OK with a failure below 63.07 required to negate that call.  In the same way a cautious bearish punt would be OK from this range’s upper-quarter with a break above 72.72 negating that call and resurrecting a broader bullish count.

While the recovery from Sep’s low and historically bearish sentiment conditions maintains a longer-term base/reversal count, the Dec contract’s continued inability to break above former lower-70-handle-area support-turned-resistance on a weekly close-only basis below maintains 30-Sep’s 72.72 high as a key threshold this contract needs to break to resurrect a broader bullish count.  This said, a failure below 63.07 remains required to really threaten such a broader bullish count.  The market’s position in the middle of these two directional triggers makes the challenge even tougher because the risk/reward merits of initiating directional exposure from such range-center conditions are poor.

Moreover, the market’s position in the middle of the past YEAR’S range on a weekly log active-continuation basis is also a coin flip basis the Dec contract.  These issues considered, a neutral/sideline position is advised for shorter-term traders while a cautious bullish bias is advised for long-term players with the stipulation that risk to 63.05 is acknowledged and accepted.

JUN HOGS

Looking at the back-month Jun contract however, and save for a very minor bearish divergence in micro momentum, the market has yet to provide the evidence needed to threaten, let alone break the past couple months’ broader and still-developing bull trend.  The daily chart below shows the market sustaining levels above a preponderance of former 92.50-area resistance-turned-support, let alone smaller- and larger-degree corrective lows at 91.47 and 89.10, respectively, that continue to serve as our short- and longer-term risk parameters to a still-advised bullish policy.

On a weekly basis for the Jun contract, the chart below shows the market’s encroachment on the upper recesses of this year’s range, so we can’t get complacent about any peak/reversal threats that would stem from this market’s failure to sustain gains above our risk parameters specified above.  If we’re supposed to be bullish “up here”, then the market should be fully expected to sustained recently won gains above 91.47 and certainly above 89.10.  Its failure to do so will threaten and then negate this specific count and warrant defensive measures ahead of a larger-degree correction or reversal lower.  In lieu of such weakness, further and possibly accelerated gains should not surprise.

These issues considered, a bullish policy remains advised for the Jun contract with a failure below 91.47 required for shorter-term traders to step aside.  Commensurately larger-degree weakness below 89.10 is required for longer-term players to move to the sidelines to circumvent the depths unknown of a larger-degree correction or reversal lower.  In lieu of such weakness, further and possibly accelerated gains remain expected.

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