“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​

5/14/2024

​

Live Cattle:

Polar opposites in the basis of fats and feeders.  In fats, it's $9.00 positive and in the feeders $14.00 negative.  How is buying feeder cattle futures at a premium and selling fat futures at a discount profitable?  That is exactly what the board represents at the moment.  In the cash markets it will differ as once the feeder steer is placed, then the price of has no further impact on margin.  Everything after the purchase of, produces the remainder of the margin impact.  Corn may trade lower, but at it's low, no cattle feeder was jumping for joy.  While potentially dead wrong, I feel a great deal of activity in futures is merely futures traders.  The enormous loss of open interest suggests that only those, who never leave the market, are the ones participating.  With some percentage the computer generated trading only, it narrows the field even more as to human interaction.  So, while futures are active, I think they are only going to continue to trade within the triangle.  I have no doubts computer generated programs can pull offers fast enough, and often enough to keep bidders paying a higher price.  Recall a great deal of existing orders are there with no intentions of being filled. That is how the market moves so fast in price is the ability to pull the next order as a market order is searching for a real order to match with.  I think watching what the packer pays, how deep in the red their margin goes, and any further aspects of consumer demand, more or less, will be of more benefit than the volatility of futures.    

​

Feeder Cattle:

The August closed above $255.22 today. This voids the previous wave count and opens the door to a new one.  I am unsure of the new count as the old one was just voided.  I am not bullish as the index will have to trade back above $247.18 before it changes the wave count on the cash markets. In comparison to futures, the same day that made the $247.18 high, 4/29, the August futures topped at $261.80.  Hence a trade above $261.80 August would suggest a reversal, and potentially a test of the down trendline of the triangle. That does not mean that the index will trade up to those levels, as divergence and convergence is rapid with futures and slow with cash.  Nonetheless, it appears as most humans were either short or didn't want to be short at the lower levels as I don't think much of the buying today was intended to be long.  I think it more short covering with the computers able to produce this in quick fashion. I think today's divergence of basis is greatly beneficial towards backgrounders and has yet to be anything but detrimental to the cattle feeder.    

​

Hogs:

Hogs were higher with the index lower.   Futures traders appear methodical in converging basis as to not get the futures too close while time remains.  Nonetheless, the two will converge and as poor as my speculative attempts were at shorting hogs, the index remains well below where a great deal of minimum sale floors were recommended.  Not to say the index won't rise further, but regardless, the basis was captured and the index moved nowhere near the level of the futures as of yet.  

​

Corn:  

I think the planting delays are minor in comparison to the benefits of the rain.  I think opportunities abound with the most recent rally, regardless of how much more upside or downside price movement may come.  With November teetering once again at the $12.00 level and December corn not having breeched $5.00, there may be some questions asked as to why action wasn't taken on a $.50 move higher in corn and $1.08 rally in beans.  Were the planting delays to spur prices further, there won't be many excuses for farmers not laying off risk of potential adverse price fluctuation.  

​

Energy:

Energies were lower with gasoline leading the way today. The PPI was bearish energy due to all other aspects of inflation impacting the producer, and energy.  I don't think this is consumer demand driving prices, I think it excessive government spending on illegal aliens. Even if the spending is not all of the issue, the dilution of every tax paid service to the consumer who pays taxes reduces their quality of life. So, yes I do believe the stagflation is bearish towards energy.  Diesel fuel continued its bear market with new lows today in this decline.  This is bad as it shows our manufacturing and transportations to be weakening.  Gasoline got busy as well and made new lows as well. This is the consumer talking with their wallet in reducing driving.  Crude was weak, but traders were unable to push to new lows, but did exceed Monday's low.  Tomorrow's CPI data is now expected to be hot as well. While business and manufacturing can be slow in slowing down, consumers can be very quick in turning off spending.  That is what I expect most, is further contraction in consumer discretionary spending. 

Bonds:

As the inflation is stagnating, and consumers appear to be in a pinch, it leads me to believe excessive government spending as the unbreakable factor that has to be broken to curb inflation. Bonds were higher after further inflation data was released. Why?  I think it due to recognition that we will have to have lower rates to spur consumer spending, if or when government spending slows.  Which most likely won't be until at least November, and then we have to worry about the next four years with either the same destruction of the US, or maybe, hopefully, there is at least some slowing of the decline by another administration. 

​

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.