Will Hogs Answer the Cattle Call?

From the Desk of Ian Culley @IanCulley

Stock market bears and tech bros are whining in the corner as energy outperforms.

Haters can hate all they want…

Energy marks the spot when it comes to stocks.

Spencer and I discussed it on Wednesday’s “What the FICC?” episode, highlighting the absolute and relative uptrends across the space.

Energy is clearly resuming a leadership role in stock and commodity markets. But crude oil isn’t the only commodity exhibiting strength.

Cattle are ripping higher, too!

Check out the daily chart of live cattle futures:

Live cattle are breaking out of a multi-month consolidation, printing new all-time highs.

The path of least resistance leads higher toward 202 as long as price holds above 184.

I highlight longer-term upside objectives in today’s “What the FICC?” episode for live cattle and feeder cattle (also posting new all-time highs).

Interestingly, commodity bulls have overlooked lean hogs.

While I don’t usually trade hogs, this has me thinking… Are lean hogs the next commodity to rip?  

It’s possible! Especially as live cattle and lean hogs have peaked and troughed together over the past eight years.

But the strong tendency for these markets to turn in tandem broke down last year, leaving hogs stuck in the mud (or below overhead supply.)

We could witness a face-ripping rally if hogs break free.

Here’s the December contract carving out a potential base:

The majority of activity is taking place in the October contract. That will likely change next week as traders roll to December.

Since the front month (Oct.) is trading at 83, I have my eyes set on the spring highs at approximately 85.50.

A break above those former highs flashes a buy signal with a target of 96.75.

Crude oil isn’t the only commodity that benefits from rising interest rates.

Yes, I’m leaning into the relative strength energy has to offer. (Buy the strongest, sell the weakest).

But I won't let that deter me from buying other assets, mainly commodities, on the verge of explosive rallies.

Stay tuned!

Click here to watch the most recent “What the FICC?” episode:

And be sure to download the slide deck here.

COT Heatmap Highlights

• Commercial hedgers slightly reduced their net-long position in palladium after holding at record levels for months.
• Commercials inch within one percent of a three-year net-long extreme exposure for corn.
• And commercials post new three-year net-long extreme positions for K.C and Minn. wheat.

Click here to download the All Star Charts COT Heatmap.