Commodities are confusing markets!
Animals eat grains, so when grains go down you expect the meat market to go down too! But when grains were going up, most of the meat market was languishing at the lows. May be common sense is not that common in these markets. The meats markets is an illiquid market and not for faint hearted, definitely not for day trading in my book. But these markets provide (sometimes) good trends for long term/swing basis. I have been going through some of these markets and they have had good up trend lately, having languished at the bottom for most of the commodities bull run. So something is going on in these markets.
Live Cattle (LEm0)
Live Cattle have had strong run up since December 2009 and recently had small pullback. The pullback appears to be wave 4 of a 5 move up (red wave on the chart) with possible target of 99.50 or higher. There is a possibility to move further higher as red 5 wave would actually be yellow 3 but I will cross that bridge when I reach there. The market has witnessed support at critical technical point (50% of wave 3). I have some long positions and I am planning to add more as it breaks higher. Initial stops are below the lower support zone (90). The aggressive stops can be moved up as the market makes the right move.
Feeder Cattle, Lean Hogs and Pork Bellies have similar setup but more on that later.
… to be continued …
