Review Of Lean Hogs
Eric De Groot | Aug 03, 2015 12:57AM ET
The cycle of accumulation and distribution defines cause (building) within minor mark down phase for lean hogs.
Profit-taking that relieved overbought (OB) and weakness in live cattle have lean hogs struggling for a positive close for nearly two weeks. Growing pessimism must be framed within the context bullish concentration (see leverage) and the proximity to the summer transition (see time).
Insights follows interplay of price, leverage, time, and sentiment (click for further discussion of Reviews) to help recognize the transition from cause (building) to mark up or mark down for subscribers.
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Trend
Positive trend oscillators define an up impulse and rally from 79.44 since the fourth week of July (chart 1). The bulls control the trend until this impulse is reversed.
A weekly close above 94.83 jump the creek and extends the countertrend rally. A close above 133.83 denotes the return of mark up, while 58.6 breaks the ice and denotes the resumption of mark down.
Failure to close above 80.83 during seasonal strength (see time) must be considered a sign of weakness (SOW).
Leverage
The flow of leverage defines a bear phase since June 2014 (chart 2). A series bullish setups since February 2015, known as clusters, reflects at least an attempt to change the phase. A DI2 close below its June 2013 high reverses the phase.
A diffusion index (DI) of 69%, another bullish setup within a cluster dating back to June, defines concentrated accumulation. A capitulation index (CAP) of 68% supports DI's message (chart 2A). This setup, the flow of leverage and sentiment from fear to complacency recorded on 07/21 at 75.88, favors continuation of the rally rather than a change of trend (see trend).
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Positive leverage oscillators define an up impulse that supports the bear phase and trend (chart 3).
Time/Cycle
The 5-year seasonal cycle defines weakness until the fourth week of August (chart 4). This seasonal tendency tightens risk management for bulls that purchased April's bullish crossover (see trend). The bears are still eying the summer transition for additional SOWs.
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