COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(October 29, 1997) HOGS: SHORT TERM–Fears of reduced Asian purchases are weighing on the hog market. Cash is also expected to be weak. Slaughter levels have been higher than expectations, also bearish. On the bullish side is the Russian purchase, the size of which has yet to be confirmed. A modest number, near 2,000 carcasses, for example, will probably be met with selling. A larger number, near the 200,000 first reported, would probably encourage buying. The market has already experienced a large selloff due to increased supply, so it may be that much of the downside is factored in. Seasonals suggest buying at this time.
RESISTANCE–Resistance basis December lies near 6200, 6272, 6300, 6400.
SUPPORT–Basis December lies near 6160, 6100, 6000, 5960, 5890, 5850.
RECOMMENDATION–The current setback may be a buying opportunity. Aggressive traders could consider buying December hogs on dips to the mid-low 6100's with stops under 6090 or 6000 or of 50-100 points. Look for a test of the 6500 level, but be alert for selling as 6400 is approached. We've seen quite a bit of selling in this market, so short-covering may be more of a feature on rallies. If the funds decide to blow out of positions, the upside could be a bit higher than expected. Option traders could consider buying December calls at current levels for an eventual rally to the 6300-6500 area.
M. Steven Morgan
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