Pullback on Disappointing Trade War News

By Cassie Fish, http://cassandrafish.com

Most active Dec LC have an inside day going so far, selling off on disappointing trade war news yet again but so far, holding yesterday’s low. The market is well above the 10-day moving average, $115.60, a key point that has held the market since it traded above it the second week of September.

The ‘news’ which all readers would be aware of by now, was China officials expressing doubts about reaching a deal with the U.S. on trade, published by Bloomberg news.

Dec LC has dropped 177 points from its high so far, shy of the 220-point correction posted on October 18, the last correction. But it is the final day of the month and the funds have the majority of the money made on the up, begging the question, will the funds defend the market on the close? The intra-day technical indicators are experiencing a decent correction.

The national negotiated cash cattle trade totaled 18k as of yesterday, averaging modestly higher than last week. Southern cattle feeders are willing sellers, anxious to keep cattle moving now that prices are near a breakeven for some and also to open up pen space needed for incoming placements during this busy time of year. Don’t be surprised to see the western Nebraska and northeastern Colorado trade take place on Saturday morning again at higher money.

The USDA released carcass weight data and steer weights were 900 pounds, down 1 pound from a week ago, up 7 pounds from a year ago and down 7 pounds from the 5-year average. Considering one major plant has been down for almost 2-months, it is not a stretch to think that some cattle have not been harvested in as timely a fashion as would have been the case. Overall, the fed slaughter rate has been good and for the week ended October 19 at 502k head, beat the prior year by 7k head.

Oct LC expires today and has posted a range of over 300 points with only a minuscule 40 remaining open interest coming into today. Talk about a commodity contract that is a mere shadow of its former self. The spread between Oct and Dec LC plummeted to -627, near its low when the market bottomed in September. This will embolden those bearish Dec LC, viewing it as too high relative to cash and vulnerable with the on-coming fund roll.

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