RJO FuturesCast

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Tighten Cattle Bull Risk Amidst Growing Threats

Posted 02/14/2019 10:02AM CT | RJO Market Insights

Live Cattle Weekly Chart

In our past couple weeks’ updates we’ve been advising traders to tighten up their bull risk assumption given a number of developing threats to at least the portion of the bull from 13-Nov’s 118.55 low and possibly the major bull trend from last May’s low.  These threats include:

  • the market’s position at the extreme upper recesses of the past couple years’ range shown in the weekly chart above
  • historically frothy levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC
  • the prospect that the rally from 13-Nov’s 118.55 low is a complete 5-wave Elliott sequence as labeled in the daily chart below and
  • the developing potential for a bearish divergence in daily momentum – CONFIRMED below 01-Feb’s 125.75 initial counter-trend low.

Live Cattle Apr '19 Daily Chart


Additionally and after 31-Jan/01-Feb’s spasm lower, the subsequent recovery attempt to Tue’s 128.50 high looks to be only a 3-wave affair to this point.  Left unaltered by a recovery above 128.50 and certainly with a failure below 07-Feb’s 126.625 low that would CONFIRM Feb’s rebound as a 3-wave event, that recovery to 128.50 may be considered a corrective/consolidative affair that warns of a resumption of 31-Jan’s break that preceded it to new lows bellow 01-Feb’s increasingly important 125.75 low and key risk parameter.

A failure below 125.75 would expose key former resistance-turned-support from Oct-Dec’s 124-handle area as the next key downside threshold for the bear.

These issues considered, a cautious bullish policy remains OK with a failure below 126.60 required for shorter-term traders to move to a neutral-to-cautiously-bearish position and for longer-term players to pare bullish exposure to more conservative levels.  Subsequent weakness below 125.75 will confirm a bearish divergence in DAILY momentum and threaten the longer-term bull enough for even long-term players to move to at least a neutral/sideline position, if not a cautious bearish stance as the market would by then have identified specific and key corrective high at 128.50 and certainly 129.50 from which a new bearish policy could be objectively based and managed.

Live Cattle Apr '19 60 Min Chart

RJO Market Insights