The information and opinions expressed below are based on my analysis of price behavior and chart activity
Thursday, May 15, 2025
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Every morning, at about 8 AM CST, I post a short video highlighting where I see opportunities in the futures markets. You can view my most recent video here
August Live Cattle (Daily)
Last week in this space, I wrote about the June contract. Open interest and trade volume has since shifted to the August. August Live Cattle dropped 3.525 today, to settle at 205.850. At first glance, it might appear there is a gap on the chart from yesterday to today, but today’s high did overlap yesterday’s low, so no gap. The week started with a sharp jump higher on Monday, in reaction to news that the US/MX border has been closed for cattle imports. Again. However, there was no extension of the price over Monday and Tuesday. It basically went sideways. Yesterday, we did see a spike up to a new contract high of 214.500, but that was met by selling pressure and the market closed some 5.125 off of the high. Volume was also high on that reversal day, yesterday. Today the futures went lower again, and I do think there’s more downside ahead. I’m not getting “bearish”, read my comments on the monthly chart below, but I think a short-term test of the 50-day or 100-day averages is likely. Those are at 200.871 and 195.308, respectively. (green/grey) The 50-day has been a solid support level over the view of this chart, in my opinion, but is has been breached a couple of times, briefly in February and again in early April. On those occasions, the 100-day held the market up and proved to be support. Stochastics were overbought from April 22nd until yesterday and are currently pointing toward lower prices. The short-term moving averages (blue/red) on the chart are the 5-day and 10-day. They are both above the market right now at 209.605 and 209.162, respectively. The 5-day is starting to hook lower and the 10-day has lost most of its upward tilt, but they are still in a bullish pattern, for now. Barring a substantially lower open tomorrow morning, aggressive and well-margined traders may do well to consider short futures positions, with an eye toward a potential target near 200.000 or 195.000. Cattle producers that have market risk, may do well to consider Put options. August options expire in 78 days. 200.000 Puts, for example, closed at 4.200 today, or $1,680 plus commissions/fees. The Delta for that strike price is currently .33, so you’ll need 3 of those to cover the price change on one 40,000# contract. The benefit to that is no margin risk, only premiums paid, in my opinion. There are several other option strategies that may work should prices go down. Reach out to me directly if you’d like some additional thoughts on hedge positions or strategies.
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Every morning, at about 8 AM CST, I post a short video highlighting where I see opportunities in the futures markets. You can view my most recent video here
August Live Cattle (Weekly)
The weekly August Live Cattle chart above goes back to the beginning of the contract in February of last year. Unlike many other markets, Cattle futures don’t trade with a large time horizon. As of this writing, the August contract is down 3.725 on the week and is working on a large Bearish Engulfment. The market started the week above last week’s high and is currently trading below last week’s low of 206.500. Given the name, I’m sure you’d understand why this doesn’t seem like a bullish development. It is possible the we’ve seen the “top” of this market, but I haven’t seen enough to confirm that. Typically, we’re entering the “grilling season” at this time of year and Cattle prices tend to trend higher until the August contract expires. Is it due for a setback? Yes, I think so. If you look at the chart, you may notice the Stochastic indicator is starting to come down from overbought status this week. It’s also been a long time (last August) since this contract was oversold. I don’t expect oversold to occur yet, as the indicator has bottomed out, so to speak, at roughly that 50% level since last October. In the long run, I would expect the seasonal pattern to hold true, and I think we’ll see higher prices later in the summer. For now, I do expect a pullback. The 5- and 10- week moving averages are still inclined upward, and may offer support levels. Today those are at 205.285 and 201.202, respectively. (blue/red) I think it’s likely those can get breached or touched. To my eye, those moving averages have held as support going back to last October, when they shifted to a bullish trend configuration. I do think it’s possible for a test of or through the 200.000 mark. The 50-week (green) is down near the 186.107 level. If we get there, I think that may signal a shift in the long-term trend.
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Every morning, at about 8 AM CST, I post a short video highlighting where I see opportunities in the futures markets. You can view my most recent video here
Jefferson Fosse Walsh Trading
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