Cattle and Milk

For all the reasons I explained below, I do feel that cattle futures are now for buying.  The chart below shows how severely cattle have been beaten up.  Prices are at an extreme level below the 200 day moving average.  The green arrows on the chart below show that the extreme stretch above the 200 sma back in November last year is the same distance we are below the 200 sma now.  Given how stretched the dollar is now, and how stretched the rest of the commodity complex is, I think it will be very difficult for this market to fabricate one more major drop.  The only pause I have is that the commodity channel index shows some room for prices to make one more drop.  If we were there now, I would be 100% bullish.  At the moment, I would be 75% bullish. 

One of the ugliest charts you will see anyplace will be Class III Milk Futures.  Again, this is not a place to go into panic selling on the milk.  Being tied very close to the dollar, remember how stretched the dollar is.  Milk is stretched to a greater degree below.  A modest pull back on the dollar should yield a bounce back on the milk to at least $14.4 and probably to $14.90 according to the Fibonacci retracement levels I see.   

In my opinion, there will be a better situation ahead to set a floor under this milk market, either with LGM or using an option strategy.