Feeders face the dollar

December 10, 2014 08:45 AM

It is well known that when the dollar bottoms and has a major move, other markets tend to sell off.

This was very apparent in 2008. It is occurring again this time in 2014 but so far the beef appear to be ignoring it to some degree. I say to some degree because the feeders continue to hang around their historic highs. So it appears they are fighting this tendency and consequently ignoring the dollar influence. But maybe not.

In 2008 when the dollar bottomed, it took one month before the feeders made a top. They then started a long drawn out consolidation that took three months before the serious selloff started. During that time feeders had four false moves suggesting the start of a major selloff. Part of the reason was that the dollar, after making a low also consolidated. It was only when the dollar broke out of that consolidation that the feeders finally collapsed.

Not so this time. This time the dollar bottomed in May. Feeders continued to rally and finally made a major top in October – a lag of five months, not one. During part of this time the dollar consolidated and finally really took off in mid-August. Instead of starting a serious selloff in response as they did in 2008, feeders have continued to consolidate--just as they did in 2008. In fact this current consolidation, so far, is exactly the same as the consolidation formed in 2008. Since the top made in October, they have had two false starts in terms of a selloff. Today’s action starts the third.

So it appears that the fundamentals of the beef industry did over power the dollar move to some extent but could be now losing influence. If feeders continue to follow their 2008 pattern this current selloff could stop with another minor rally followed by a fourth selloff that also aborts. 

And then what? In 2008 after the fourth aborted selloff, feeders gave it one more serious try to rally. They reached the high made in May and took it out by 5 ticks. That was it. Their major selloff then started.

So even though the feeders have not done much since their October high, technically it appears they have been doing a lot. It appears they could be setting up for another major selloff just as they did in 2008. Whether they will follow the exact same pattern remains to be seen but so far it is virtually a carbon copy chart wise.

In other words, based on their behavior in comparison to 2008, they has been very busy forming a top. Time will tell.




About the Author

Judy Crawford is a senior broker at Zaner Group. Raised in rural Minnesota, Judy went to the University of Minnesota and received a BA Degree in language. She specializes in technical analysis of the markets and write a market commentary entitled “Market Update” that is available to readers via e-mail. Sign up at her website: www.tradingfuturesmarkets.com.