Traders are closely watching the cattle markets after an interesting couple of weeks. One advisor says he has been watching the funds back off long positions.
“You’re seeing what I think is some exit by funds. They’ve been strongly long in the cattle, and it flipped over last week. You’ve had weaker cutout values as well, and they’ve taken a pretty good hit this week. So, the combination of the two puts the market in motion. It uncovers Sell-Stop orders, which are sales that aren’t necessarily intended, but they happen when you’re either exiting a long position or establishing a new short position. So, you get a combination of things, and that’s why sometimes the market moves really fast. It’s because you’ve got different angles all coming together at one point,” said Bryan Doherty.
Doherty says despite all of the action, he is not concerned in the long run.
“I’m not concerned that there’s going to be a whole bunch of shorts coming in on the big-picture perspective. From the near-term picture perspective, I am concerned that there’s technical weakness in front of the market and money flow, but from the supply side, they just aren’t there, and the cattle inventory report this last week confirmed that we’re down one percent from last year. When does this herd stop shrinking? That’s a good question.”
This month’s Cattle on Feed report showed the herd down a percent from this time last year.
