THE PACIFIC COMMODITY LETTER
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360-289-9441(March 12, 2000) HOGS: I have often wondered what would happen in a market that has shown a fair-sized rally when buy-stops of significant proportions were "engaged." Would the buying immediately dry up, or would this bring in fresh blood, so to speak? We are going to find the answer to this in the Lean Hogs market next week...as as many as 1500 contracts were "set off" as buy-stops when new highs were reached Friday...in the April through July futures. There was strength in the cash Thursday and Friday technical buying took over.
Futures are showing premiums to cash and with low corn prices there is no need for producers to keep up their heavy marketings...so, smaller supply means demand must pay more, or so it appears at this writing.
Bellies followed higher Friday.
April lean hogs made a new high Friday; stochastics are strongly bullish; direction and momentum indicators are very positive and 9- and 18-day moving averages are in the "buy" mode. In fact, the chart is as one would expect with a long-rallying market making new highs; everything looks rosy. Stochastics are overbought and nearing 90%; RSI is over 70% in the 9-day formula. Up and due for a correction, but we do not call the turn.
Martin B. Miller
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