wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(December 11, 1997) CATTLE: SHORT TERM–Expectations of reduced slaughter sent the cattle back to the lows. This will keep cattle in the feedlots and may raise weights. Reports of a winter storm added support, but overhead selling kept the market down on the day for most of the session. Some traders suspect that the storm system will be too weak to create a serious problem. Boxed beef prices improved. The cutback in slaughter, while short-term bearish, could improve prices if demand takes up available supply. We have entered the delivery period for cattle, and if there are fewer than expected deliveries or if they are taken by strong hands, it could rally the cattle. Conversely, heavy deliveries and weak takers (spec) of deliveries will suggest a soft market for the near term. Some traders suspect that cash has put in a near-term low. Seasonal patterns would tend to support that line of thought.
RESISTANCE–Resistance basis February lies near 6725, 6760, 6810, 6850, 6890, 6930, 6950-6970.
SUPPORT–Support basis February lies near 6610.
RECOMMENDATION–Aggressive traders might buy February cattle on this dip. Use 100-point stops. If very aggressive and short-term, consider selling February cattle near 6850 with stops over 6885 or of 50-100 points. Look for a break back to the upper 6700's. Long-term option traders might buy April calls.
M. Steven Morgan
Hogs
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Cattle
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