I posted a reply over on another forum about cattle. I'll post the same thing here.
FWIW, of course.
I'm still on the sidelines - too much has been unclear with the way I look at the cattle since I exited earlier. A few thoughts, FWIW:
We have a new moon on the 13th. (I probably just lost most everyone right there!) But - we saw a high in Feb with a NM. A low in April with a FM. The next NM looks like it wants to invert, and it did with the following NM in May. Market tries to make a high with the next FM, and a low would normally have followed on the NM just coming up. But, it has the look of another inversion - too soon to know, however. How it behaves into and out of that time could give a good indication of what is coming. Inversions can be very indicative of changes of trend, IMHO. (Then, again, the market could continue to be chaotic and frustrating - BG)
The last time we saw a major monthly low in this phase was in August, 1991. The market was extremely bullish following that low, and after a rally, it crashed into a really bad low in December, four months later. Again, FWIW - but be cautious about a psychology turn to really bullish. (I'll be up north fishing . . . )
I also have a hard time being bearish right now. Weights are not a problem. Packers are paying slightly more than they have been recently, but still seeing record profits according to my data (going back to 1984). They have plenty of room to raise bids and still be profitable. Demand is reported to be good - including export demand.
The big thing here, IMHO, like I posted previously, is that whenever a wall of cattle is anticipated, things never turn out the way everyone expects. Never, IMHO. And, again, the danger is that we will see excess bullishness come out of this - in fact, we seem to be seeing the beginnings of this already. Carcass weights, after adjustments, took a small jump - nothing to worry about - unless it turns into a trend.
You are the man when it comes to cattle........which is how you got your handle CattleFeeDeR.
I traded the live cattle a few times 20 years ago on snowstorms in the S.Plains but will rely on you to keep us posted.
3 month chart Feeder Cattle
1 year Feeder Cattle
5 year chart Feeders
10 year chart Feeder Cattle.........dang, you sure get a different picture with each time frame
Yes, each time frame gives a different view.
But, I assume that these charts are continuous futures charts. In order to build a model, you need a chart that shows - not price - but price change accurately. The only chart that shows that, assuming you are trading futures and not cash, is a roll-adjusted chart where the gaps caused by rolling from one contract to another are removed. A roll-adjusted chart looks completely different than a nearest futures chart.
Doesn't a roll adjusted chart cover up some of the seasonal cycle? If so, that would mean a cash chart might be the only answer,for cycles?
I notice that at trading charts.com that they give historic charts for each contract month.
Yes, most definitely, a roll adjusted contract will eliminate any seasonal patterns - that have already been adjusted for in the individual futures contracts. The roll adjusted contract is only for trading futures - and only necessary if you trade long term enough that you need to roll from the current one to the next one. If you are only trading, say, June LC, and you only study the historical June LC charts, it is not useful.
Of course, if I was just trading and looking at June LC, I would build a roll adjusted contract using only historical June contracts - and none of the others. That way I would have a long term contract that accurately gave me price change between any two points, and I could build a seasonal based on exactly the data I was using to trade.
Any cycle that is at all close to an annual cycle, if nearest futures contracts are used to build a long term contract, is lost by being overwhelmed by the seasonal. And, if the individual contracts are already building in a seasonal (June normally discount to April), you do not want that in the data you are using.
What is left, as far as a seasonal, is any seasonal cycle that is NOT accounted for in rolling from one contract to the next. And, that is valuable - but, again, only when dealing with futures prices - not cash prices.
Feeder cattle very strong the last week...........often, they go in the opposite direction of grains.
7 day chart of Feeder Cattle
Feeder Cattle 1 month of prices below
The cattle complex should open on a mixed basis thanks to a combination of follow-through selling and short-covering. Hog paper is also expected to open on both sides of unchanged with nearby issues gaining ground on deferreds.
Cattle: Steady-$2 HR Futures: Mixed Live Equiv: $145.65 – .41*
Hogs: $1-2 HR Futures: Mixed Lean Equiv: $ 85.64 + .97**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
The odds are low that anything of significance will develop in the feedlot trade Tuesday. Rather, we’re more likely to see a sleepy affair with bid and asking prices poorly defined. Live and feeder futures are set to open on a mixed basis with traders torn between residual selling interest on one hand and respect for cash premiums on the other.