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Rumors of new export business, lower average weights and a continued firm trade for pork cut-out values are seen as positive forces to help support the rally last week. A seasonal decline in slaughter is expected to help provide some support as well. August hogs pulled back to under Thursday’s lows on Friday morning but managed to hold support and closed just slightly lower on the session. Some traders suggested that hog prices managed to draft support from gains in the cattle market and a steady to $1.00 higher trade in the cash market. There was talk that some packers were considering cutting hours from this week’s kill, and that could mean less demand for cash hogs this week. Like cattle, hogs have bucked the steep liquidation trend that has hit a number of commodity markets last week, however, the trade may be getting concerned that the market is getting overbought, especially with the current heavy premium that futures are trading relative to the cash market. Cash hogs traded steady to $1.00 higher on Friday and the market tone is mixed for today. The CME Lean Hog Index as of June 15th came in at 92.51, up 89 cents from the previous session and up from 90.51 the week before. The estimated hog slaughter came in at 368,000 head Friday and 2,000 head for Saturday. This brought the total for last week to 1.973 million head, down from 2.000 million the previous week and down 1.5% from last year. Pork cutout values, released after the close Friday, came in at $95.77, up $2.96 from Thursday and up from $90.33 the previous week. This is the highest pork value since May 19th. A surge higher of $7.04 for loins to $116.82 supported the higher cut-out. The Commitments of Traders reports as of June 14th showed Non-Commercial traders were net long 3,018 contracts, an increase of 1,259 for the week. This is a positive short-term buying trend from large speculators. Commodity Index traders held a net long position of 102,856 contracts, up 2,547 for the week.
TODAY’S GUIDANCE: The short-term cash news is mostly positive, but weak packer margins and the overbought condition of the market plus the big premium structure of futures to cash suggests some “back and fill” type action over the near-term.
TODAY’S MARKET IDEAS: August hog short-term resistance is at 96.22 with some light chart resistance at 94.30. Better support is at 93.12. Look for 93.12-96.22 range for early this week and we can not rule out an eventual move to 98.17.
