Shootin' the Bull about recession

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

1/2/2024

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Live Cattle:

A rally out of the chute this morning in the cattle markets.  It leads me to believe that wave A is still in progress, but may be starting to show signs of how it will unfold.  If in a 3-wave pattern, then 2 of the 3 waves may be complete with the current rally and new highs the formation of a minor C wave to complete wave A.  I expect a tremendous amount of price fluctuation and recommend you have pencil's sharpened for what will be needed to profit.  At present, my focus on fat cattle is to get February and April marketed as high as possible on the futures, then see where convergence takes place.  Due to the expectations of high price volatility, there may be opportunities presented for very short periods of time.  I highly recommend you consider some price levels you would conduct business at, and then go to work placing orders to attempt to achieve those levels.  

Feeder Cattle:

I think a lot of cattlemen bought futures today in lieu of the physical. There just won't be a great number of animals to be marketed for another week or so.  Therefore, look for opportunities in basis spreads as futures traders widen it out, further from the index, with a known factor of converging to the index at expiration. As above, I believe the anticipated volatility will provide several opportunities to market and procure feeder cattle.  Use the basis spreads to help achieve this.  If you have to pin the tail on the donkey at some point, then at least have a good idea where the Ass is.  When the donkey is moving, and you are moving, it makes for a very difficult target to pin the tail on.  Basis spreads are very important in my analysis.  While not the gunslinger mentality of all or nothing,  it does allow for being in the gunfight, with some structure around you for protection. At present, the basis is over $10.00 negative to the March.  Is that profitable?  It is all that is available today, and with an options strategy, could produce more.  If you wait, where will the price be when marketing time frame is here?  Is that profitable? Hard to tell as the future is unknown.  Nonetheless, get some idea of where you need to market some inventory, watch for a basis spread that becomes profitable, then act.  For those needing to procure cattle, go buy them physically, as that is where they are the cheapest.  The positive basis spread, for which would have been advantageous towards procuring inventory, is long gone.  If it returns to near or positive, then cattle feeders need to be prepared to buy futures.  Especially were basis to become $3.00 to $5.00 positive again.  This is going to be a much more difficult year than last.  There are price points made that will be difficult to exceed.  One has to consider that no consumer wants inflation, grocers work on exceptional thin margins, and packer's like to remain in the black.  So, in order for cattle to get higher, consider how you will get the consumer to either eat more, or be willing to pay a higher price.  Only a cattleman has any desire to see cattle prices move higher.  

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Hogs:

June hogs made new contract lows today.  I anticipate a sharply lower trade going forward, as the index continues to plummet.  While it is not too late, some of the advantages of the higher trading are now in the rearview mirror.  I continue to anticipate hogs to trade lower. 

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Corn:

Corn and beans broke today.  Beans gapped lower and closed near the low.  Corn opened lower and started making new contract lows.  I anticipate more of the same.  Downside target for March beans is $10.00.  

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Energy:

Energy was exceptionally volatile today with an over $3.00 range.  It started off higher and closed lower.  The formation on the chart leads me to believe that a wave 1 low was complete, today's high a wave 2 correction, and now crude oil is in a wave 3 down.  I expect energy to trade lower.  Recession is believed not only looming, but starting.  

Bonds:

Bonds ended lower today.  I feel this to only be a correction.  Another day or two sideways will lead me to anticipate a resumption of the up trend.  It takes money to inflate and that is believed running out at a rampant pace for consumers.  Just keeping up with prices as is, will remain a challenge.  The further loss of basic government services will lead more to have to fend for themselves.  I don't think the government is ready to crank up the printing presses yet.  I think they will wait a little while longer for the screams to get louder, so when they do crank up the presses, it will make for a larger movement in whatever it is they are attempting to stimulate.  I believe without a doubt they will stimulate again, in some form or manner, as the agenda is believed too far in the works to abandon now, or could potentially be ripe for another round to solidify the agenda.  Again, I wish I knew what the agenda is.  I think I know, but have a hard time accepting those facts at this moment. Nonetheless, the obvious issue continues to be the invasion of illegal immigrants at our southern borders.  The current government knows exactly what they are causing, dilution, (the action of making something weaker in force, content, or value.)  If you have never read "The Art of War" Sun Tzu, I highly recommend you do so.  The current invasion at the southern border is nothing new.  The infiltration of outside entities into an establishment weakens or dilutes the current status.  Similar to allowing one mouse to come into your house, but not expecting others.  The mouse of course invites all his friends and relatives until the house is theirs.  The first taste of a Coca-Cola over ice is very pleasing. The ice adds a touch of change to the coke that improves the satisfaction.  Let the ice begin to melt, and it dilutes the coke to a point in which it it unpleasant to drink. You can go from here with all of the other aspects of dilution and continue to reach the same answer.  Some ingredients add flavor to foods, as do some nationalities to some societies.  Too much of one ingredient makes it taste like that ingredient.  Too much of another nationality, just makes it that nationality.  As Ms. Eula Goodnight, from Rooster Cogburn would say: "I do not fear a skunk, I simply do not care for its odor."    

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This is intended to be or is in the nature of a solicitation. An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of the margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 

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