September 10, 2008

CME December lean hogs gap to fresh 8-month low

December lean hog futures on the Chicago Mercantile Exchange on Tuesday (September 9) gapped lower on the daily bar chart and hit a fresh eight-month low.

The contract fell to 65.80 cents a pound earlier but is currently trading at 66.25 cents a pound.

Very serious near-term technical damage has been inflicted the past two weeks, starting with a huge gap-lower move on August 27 and followed by another big gap-down trade on the daily bar chart that occurred on August 28.

The next downside price objective for the powerful hog market bears is to produce a close in December futures prices below technical support at the December 2007 low of 64.70 cents.

The next upside price objective for the beleaguered hog market bulls is to fill on the upside Tuesday's downside price gap, which means pushing prices to the 67.40-cent level. Above that lies strong technical resistance at 69.45 cents.

The hog market bulls can correctly argue that December futures are short-term oversold, technically, and due for a corrective price bounce very soon. In fact, the 14-period RSI reading of 22.67 is the lowest RSI reading in the history of the December 2008 futures contract. Any RSI reading below 30.00 does suggest a market that is overdone on the downside and due for at least a corrective price rebound very soon.