Have we seen the top in cattle?

March 22, 2016 09:13 AM

With the follow-through selloff in live and feeders today, every producer is bracing for a return to 2015. Technically, neither market is suggesting that. What they are suggesting are selloffs comparable to the one seen in either early January or late January of this year. Why? The market has technically changed since early last June, and even before that.

In early 2015 live cattle tried to bottom. But when they made a temporary bottom in Feb. 2015 and tried to recover, the alignment of the 10- and 20-day moving average were an obstacle on their weekly chart, not a support as they are now. During that time the 10-day moving average never could make it back over the 20-day moving average--a key first sign of a trend change. This time it has. And in early 2015 the monthly could never put together a buy signal. This time it has. And on the daily chart the market took out last week the high of the Dec. 30 rally top. 

That technically confirms the 1,2,3 bottom formation on that chart and a market bottom. They couldn’t do that in early 2015. This is what appears to be cattle’s issue currently on its daily chart: It finally got over its 200-day moving average last week, but typical of any market, usually the first time ends up not to be a charm. They are backing off and will most likely try from a lower level--also typical behavior of a market trying to get over resistance.

And feeders, like “live” had a problem early last year with their 10-day moving average--but on their monthly chart. It aborted every rally attempt. They are not even near that resistance now. Instead they have the stronger support of the 100-day moving average under them. Not so was the case then. And the feeders have, like the live, taken out (on their daily chart) the high of their Jan. 5 rally – confirming their 1,2,3 bottom formation too. Unlike live, they have not yet challenged their 200-day moving average on their daily chart. Instead they were going after their 100 average instead. But like live, their first attempt ended up not to be a charm either. They are right back under it today.

So, bottom line, both markets have a lot more going for them this time and appear to have completed a second wave up (rally) since their December lows. If that be the case, the probabilities of this being a more extended selloff as seen in January, but not challenges to the December lows is very high.

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.