I've been following the COT for the cattle complex for a bit and have been following the commercials for a bit. The "funds" , or non commercials, according to my work had a statistically significant reduction in their net long position over the last two COT readings. (this 7/06 release not included yet). It seems to me the commercials took the other side of that trade and seem to have made the right decision as Live Cattle has turned higher as of late. I've been using 15 week moving average on COT positioning as a percentage of open interest for each trader category and a violation of 2 standard deviations of the average reading as a "flag" to signify a statistically significant alteration in positioning. Seems commercials saw Live Cattle bottoming into late June and took advantage of that. We'll see. My last position in Cattle was long a 94/92 put spread in October cattle for 70 pts that I then closed for a scratch when my bearish themes didn't play out. Quite frankly, living in Dallas and seeing all the rain we've got made me seriously reconsider pasture conditions and think of less pressure arising from animals being dumped into feedlots. However, pasture conditions overall in the US aren't that much different from last year considering the drought in the West and Southeast ; and from what I read recently there are more cattle in those regions than in the Panhandle/Southern areas. So - could we see more liquidation and cattle moving into feedlots ? Should this rally be faded ? Boxed Beef prices haven't turned around that dramatically either. Today from reading the news it seems the market turned higher on bullish export data. But is it really meaningful? Anyway, it seems a bit early in the season to get all bullish on Live Cattle but with an absence of drought conditions in the Panhandle maybe not... What caught my eye were Feeder's today. Corn was up but given its recent massacre perhaps the market feels that in general feeding cost pressures have diminished a bit and Feeder's looked cheap to Live Cattle. Does one buy Live Cattle here and short Feeders expecting better feedlot profitability going into Fall ? Any views appreciated.
Thanks for all that Fundamental input. I am somewhat uncertain about all this rallying in LC as of late myself. Im short a strangle in Oct the 100/86. The price action on Friday was incredibly strong, up almost 2 handles. It seems that the futures are at a big premium to cash at the moment. One thing that I know could push this further is that the Goldman Roll is scheduled for today until July 14th. Thats alot of index fund fire power that could continue with this rally.
Key Reversal today in Live Cattle? We did complete a 9 day sequential DeMark Countdown and today's fade of nearly 200 pts from the intraday high points like the market got sold pretty hard up there. Feeders rejected almost off a limit high move as well. Corn didn't have that much of a dramatic action today to attribute the move to that ; perhaps the flurry in Hogs?
7/10/07 Live Cattle COT Funds; which have been steadily liquidating their net long bought added length and stand long 26,752 vs. 19,318 from last reading. Commercials; which have been gradually covering shorts and getting a bit long cut the trend and took their net long from 9,008 to 2,428 contracts. Small specs shorted some more and their net short stands at -29,179 vs -28,326. So commercials and small specs sold to the Funds. LC had a nice pop this week. Open interest also increased from 243,801 to 255,436 Nothing shows up on my screen as being statistically significant as a percentage of open interest over a 15 week SMAVG. I'm wondering if I should begin to analyze the net change from one COT to another as a percentage of OI as a more relevant tool.
criveratrading, It is very educational to read a commodity futures thread where the original poster has actual experience in the industry. Thanks. I have looked over years of COT data at Software North and I have noticed that the commercials are usually short the market but when they are net long it is usually presaging a rise in price level. The seasonal as I check it at Seasonalcharts.com shows rising tendencies into early to mid August. The overall participation is low and if there is more strength the trend followers will be absorbing the trade selling. On my 3hr LCV07 chart I saw this high level consolidation pattern and I took a small long position for a swing trade.