“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​11/4/2024

Live Cattle:​ 

With marketing's believed wrapped up tight with put options or options strategies, keeping input costs from reducing margins captured is the focus.  Of the two most important are fuel and feed.  Although feed is anticipated to rise, it is fuel that is anticipated to soar.  I do not have a fundamental reason yet, as it may not have materialized.  However, the iron does appear hot due to the middle-east unrest. It is the chart pattern and belief of more inflation that leads me to expect energy to trade higher.  As well, the significant gap and lower trading created last week has been voided by end of week higher trading that easily bled into today.  So, since you've wrapped up marketing's, I recommend you forward contract spring needs, book spring needs, top off farm tanks or buy call options on the crude oil market.  This is a sales solicitation.  For corn, it isn't as bullish, but I believe it will be harder for corn to move lower without some form of new supplies, or softer demand.  However, if corn doesn't go down, and you are going to have to have it, then I recommend you spend $.22 and own the $4.60 July corn calls and hope you lose 100% of the premium paid.  This is a sales solicitation. With the ideas of another bout of inflation on the horizon, we are asking ourselves, "do cattle and beef appreciate with the inflation, or do they depreciate due to impact on consumers resilience?" 

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Open interest continues to increase with funds believed owning 1/3 of the long positions, with the build coming after 10/21, and prices below the low made on that day.  So, it appears that a large portion of new longs are upside down and shorts not afraid to add to positions.  

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Feeder Cattle:​

​There is no difference here.  With your marketing's wrapped up, there is margin to protect in feed and fuel. I recommend you do something about it.  ​

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​Hogs:

Hogs were soft today, but not before making new contract highs in most months.  The index was up $.63 at $88.56.  ​​

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Corn:  

​Corn was mixed, beans higher and wheat lower.  Bean oil was lower, but most likely due to a response in the crush spread that had widened the past couple of days.  I am  not bullish or bearish grains, but I am bullish energy and corn and soybean oil is bio-energy.  Therefore, I expect them to have a firmer tone.  This may not mean much at first, but depending on whether energy trades higher, or by how much, it will.    ​​​​​

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Energy:

​I had time to explore the weekly crude oil chart this weekend and updated the wave count to fit all the moves I could find.  What it suggests to me is that a major wave 1 was created from the April of '20 low to the March/June high of '22.  A contracting 5 wave move then ensued to what I believe is the vertex of the triangle at the October 29 low.  A close above $71.68 on the weekly continuation chart will begin the breakout to the upside.  A close above $75.56 will add great credibility to this analysis.  I recommend topping off farm tanks, booking some spring fuel needs, forward contracting needs, or buying call options on crude oil.  This is a sales solicitation.  The reason for the crude contracts over diesel fuel is simply liquidity.  You can get in and get out of the crude options where as bids and offers can be sparse up and down the options chain for heating oil or gasoline. 

Crude oil options recommendations are:  For close in, buy the June $75.00 to $80.00 calls.  For further out, buy the December $90.00 and $100.00 calls.  These options will run between 4% to 5&1/2% of the value of the contract.  These are sales solicitations.    ​

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Bonds:

​Bonds are higher today.  I expect enormous volatility in bonds.  ​​​​​​​​​​

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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.