February 9, 2009

Analysts and brokers expect a mixed Chicago Mercantile Exchange hog open on Friday (February 13).

 

Bearish market factors include possible follow-through selling and tepid wholesale pork demand. Steady-to-lower cash hog calls and unprofitable pork packer margins are additional negative market influences.

 

By the same token, spot-February and nearby-April closeness to CME's hog index might attract speculative bulls. February and April are also oversold based on their Relative Strength Index conditions.

 

And April through July contract lows on Thursday might give some in the pit a reason to buy those months on Friday. Furthermore, potential pre-weekend short covering may minimize potential declines or lift some months into positive trading territory.

 

Meanwhile, possible residual liquidation versus electronic-Chicago Board of Trade corn gains might produce back-month hog unevenness.

 

February's 56.00-cent Tuesday low is a prime price and psychological support level. The contract's last seasonal low was 55.70 on Jan. 27.

 

February, which will expire on Feb. 13, has a 57.42-cent 10-day moving average resistance obstacle to overcome.

 

April has a chart gap between Thursday's 60.35-cent high and Wednesday's 60.60 low.

 

Pork bellies could open mixed.

 

Potential spillover liquidation and spot-February selling before the contract expires on Feb. 24 are bearish market matters.

 

However, March's oversold chart condition and Thursday's steady fresh belly quote at $75 per hundredweight are market pluses.

 

Also, shorts could cover previously held positions before the weekend.

 

February's last monthly low was at 78.30 cents on Jan. 28. The contract's 79.50-cent low on Tuesday is a key price resistance area.

 

March's previous contract low was 78.20 cents on Jan. 29. The second month option's 80.82-cent 10-day moving average is a point of resistance.

 

CME live cattle could open mostly weak on potential profit-taking by short-term longs after Thursday's run up and cash cattle price nervousness given trailing retail beef sales and slowly fading packer profits.

 

Cash-basis fed cattle bids were reported at US$80 per hundredweight in the shadow of US$85 to US$88 asking prices.

 

Fed cattle last week in Kansas and Nebraska sold for mostly US$80 to US$80.50. However, cattle in Texas fetched as much as US$82, which was steady with the previous week's trade.

 

The US Department of Agriculture's Thursday evening beef cutout item showed choice cuts were dropped US$1.36 per hundredweight and select items slid US$1.56.

 

The latest operating margin index for beef packers was plus US$11.85 per head, compared with plus US$32.20 the previous day.

 

Some spot-February liquidation could occur ahead of the contract's Feb. 27 expiration date. And, Monday is the first notice day for cattle deliveries that could surface sometime next week.

 

Additionally, some traders are worried about February's sizable open interest compared with last year.

 

By the same token, positioning before the weekend, which might include short covering, could limit some contract losses or land some months on solid ground.

 

Meanwhile, distant cattle months could trade mixed amid worries about back-month cattle premiums versus electronic-CBOT corn advances.

 

Market participants will keep close watch on US stocks that are up slightly in early action.

 

February's 82.87-cent 20-day moving average is a support level. The contract's 84.37-cent 40-day moving average is a resistance point.

 

April's 86.03-cent 20-day moving average serves as level of support. The contract's 87.27-cent 40-day moving average is a resistance target.

 

Feeder cattle could open mixed with an undertone of weakness on board premiums to CME's feeder cattle index and overnight-CBOT corn gains that might outpace potential leftover buying, a broker said.

 

A few short-term bulls may claim profits before the weekend. And, live cattle could have considerable influence on feeder cattle's direction.

 

March's 92.69-cent 20-day moving average is a support area. The contract's 95.70-cent 100-day moving average is a resistance target.

 

April's 93.96-cent 20-day moving average serves as an area of support. The contract's 96.41-cent 100-day moving day average is a resistance point.