Buy The Dip in Live Cattle?
Cattle futures have gotten hit hard over the last few weeks as headline risk coupled with bearish seasonal tendencies have led to long liquidation from Funds.
The selling pressure accelerated on March 26th as headlines of Avian flue spreading to (dairy) cattle in Texas and Kansas swept across all the different agricultural news wires and raised concerns of further spread. This news comes on what is a seasonally weaker time of year for the cattle markets. Looking at the markets in the week prior to the March 26th headline it seemed as though the market was starting to stall as it was as Funds may have been looking to reduce exposure ahead of the seasonal weakness, the headlines were perhaps the catalyst that sparked the proverbial rush for the exits.
Looking at the weekly Commitment of Traders report we see that Funds came into the year with a net long position of 17,415 contracts. The smallest net long position of the year was 12,993 on 1/16/24. After that, it was 8 consecutive weeks of buying which propelled funds to a net long of 63,311 contracts. The most recent report shows funds net long 53,281. Historically (not guaranteed) we’ve see the seasonal weakness start to subside in the last week of April. If weakness persists up to that point and fundamentals (the cash cattle trade) can remain somewhat firm, it may represent a good opportunity to the long side.
So, what does it mean to us? Well, the chart and seasonals favor the Bears right now, but this will be on our radar for a potential trend reversal in the coming weeks, ideally from lower price levels.
Check out CME Group real-time data plans available on TradingView here: tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
The selling pressure accelerated on March 26th as headlines of Avian flue spreading to (dairy) cattle in Texas and Kansas swept across all the different agricultural news wires and raised concerns of further spread. This news comes on what is a seasonally weaker time of year for the cattle markets. Looking at the markets in the week prior to the March 26th headline it seemed as though the market was starting to stall as it was as Funds may have been looking to reduce exposure ahead of the seasonal weakness, the headlines were perhaps the catalyst that sparked the proverbial rush for the exits.
Looking at the weekly Commitment of Traders report we see that Funds came into the year with a net long position of 17,415 contracts. The smallest net long position of the year was 12,993 on 1/16/24. After that, it was 8 consecutive weeks of buying which propelled funds to a net long of 63,311 contracts. The most recent report shows funds net long 53,281. Historically (not guaranteed) we’ve see the seasonal weakness start to subside in the last week of April. If weakness persists up to that point and fundamentals (the cash cattle trade) can remain somewhat firm, it may represent a good opportunity to the long side.
So, what does it mean to us? Well, the chart and seasonals favor the Bears right now, but this will be on our radar for a potential trend reversal in the coming weeks, ideally from lower price levels.
Check out CME Group real-time data plans available on TradingView here: tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
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