“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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5/6/2024

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Live Cattle:

There is a wide basis to contend with in the fats at the moment.  While not out of the ordinary, the basis is widening and will have to converge at expiration.  Futures traders helped a little by the close, but it took all day to finally get futures plus and stay there.  Although the red ink is starting to fade, losses on feeding cattle continues.  The quickest, and most sure way to bring profitability back, is to simply pay less for incoming inventory.  Corn has been a thorn in the side of most feeders as expectations for price has been lower, but stubbornly has not reached levels for which some of the price paid for feeder cattle was based upon.  Energy prices didn't subside either, or the price of money.  The bout of inflation in the first quarter was not anticipated, and seemingly did a lot of damage towards consumers discretionary spending.  With fats higher now, believed due to increased slaughter for the upcoming grilling season, and futures lower, there doesn't appear as if there is a great deal of optimism for higher anything this summer. 

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Feeder Cattle:

The feeder cattle index is void of computer generated algorithms or "spoofing" that can impact the decision making factors of a trader.  Only cattle feeders have any need at all to buy feeder cattle.  Hence the CME feeder cattle index is the expression of what humans are, or are not, willing to pay for an incoming steer.  It is possible the human was influenced before entering into the sale ring to bid by a futures trade, but it will still be a human decision when made.  Why is this important now?  The feeder cattle index is at a very interesting point.  Without a new high, above $254.10, made 9/25/23, it suggests the current rally could well be a correction with another leg to the downside before complete.  When looking at the daily index, you can see a little more of the changes over the weekly chart.  On the daily, note there has been no new high from 9/25/23 high and with there being an initial move down, from the most recent high of $251.82, a correction of, and now drifting lower, were the feeder cattle index to exceed $241.07, it will lead me to anticipate a test of the 12/13/23 index low of $215.32.  I have some aspects that suggest it could move even lower.  Note the wave count on the daily index chart and make sure tonight, you have your marketing's wrapped up tight for the year.  A close of August futures under $251.75 will lead me to believe an intermediate wave 3 of major wave C decline is in progress. Note this wave count would have futures pushing out of the triangle to the downside.  

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Hogs:

Hogs are believed in convergence and I expect them to continue lower to meet with the index reading. 

Corn:  

Traders continued with follow through from last weeks rally.  Seemingly, the factors at hand are miniscule and short lived weather situations.  Traders have now provided producers with another opportunity to market some inventory.  The rally in corn has put December back up to $4.90, but still void of a 5 handle.  I continue to recommend getting something done.  This is not an "see, I told you grains would go higher", type rally.  This is merely retracing price points that could have been marketed against months ago.  That money could have been used to pay down debt, or invest, but prices simply went round robin and wound up at the same level it was in December for corn and March for beans. Like the horse, here is another trough to drink from.  

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Energy:

Energy was able to hold its own today.  Diesel fuel is in a bear market with crude oil forming one.  Gasoline remains high at the retail pump, even though having topped on the futures two weeks ago, and down over $.15.  Nonetheless, energy is expected to move lower.  

Bonds:

Bonds were plus on the day, but have been unable to continue higher just yet.  It's going to be slower than I thought, as inflation continues to push working consumers to the brink, the government spending will continue to put more money in hands that will spend it.  

I have camped and roughed it in the wild a lot in my life.  Even then, as most of my gear was readied for the next trip, it would still take some time to get everything together.  Oh, and I either worked, or was in school during my most adventurous time. Even impressed with my own ability to get up and go, and make camp for a proper stay, I was in awe of the ability and capabilities of our youth.  They are capable of finding a tent, erecting it better than I ever could, complete with rain tarp and securely fastened to the ground.  As well, they have the ability to source out camp grounds very close to all basic needs and right in the back yard of where they go to school.  The speed in which they were able to assimilate makes them the envy of every military service.  Imagine a drill sergeant waking up to a beautifully aligned row of tents, all the same color with enthusiastic young men, women, and others, ready to go.  I hope you find this as sarcastic as it is meant to be, as I can't figure out where all these tents come from when I can't find more than two at any one place, and they are expensive!  Seemingly, these kids are being supplied with means to promote an agenda on a college campus, for which some actually had to pay to go there.  A well positioned and properly dug latrine is a good thing to have on a camping trip as well.  I didn't see a lot of port-o-potty's out there, or holes dug either.  Does no one worry about the filth created by all these humans gathering with no place to go?  Billions have recently been spent on the damage birds do when they poop.  What about all the humans from the border to the college campus?     

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This is intended to be or is in the nature of a solicitation. An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of the margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.