Last week, the cattle complex rallied beyond what most thought was possible for the post-Thanksgiving holiday week. The sheer combination of active trader support mixed with strong market fundamentals led the complex higher in prices throughout most of the week, leaving traders and cattlemen alike asking: What's next?

To recap, last week the futures complex saw tremendous support as the spot February live cattle contract rallied $9.30 and the spot January feeder cattle contract rallied $15.08. Gains were seen in the countryside as well, as the fed cash cattle market traded sharply higher. Last week Northern dressed cattle traded at mostly $340 to $345, which is $11 to $16 higher than the previous week's weighted average. Southern live cattle traded at mostly $225 to $226, which is $7 to $8 higher than the previous week's weighted average. And similar gains were seen in the feeder cattle complex. Throughout last week's trade, the CME Feeder Cattle Index rallied $24.03, to round the week out at $343.73 on Friday afternoon.

But following last week's tremendous success, the logical question arises: What's next? From a technical perspective, the market will need to see unwavering and substantial fundamental support if it's going to break through resistance around the 40- and 100-day moving averages in both the live cattle and feeder cattle contracts. That support will need to largely stem from boxed beef prices and this week's fed cash cattle trade.

Unfortunately, boxed beef prices were weaker last week, as choice cuts throughout the week averaged $364.27 (down $4.65 from the previous week) and select cuts averaged $351.90 (down $2.60 from the prior week). We could see a similar trend this week as the retail sector has adequate supplies to choose from, leaving the fed cash cattle market to do the heavy lifting for the marketplace. And, with last week's negotiated fed cash cattle trade totaling 78,833 head -- with 94% (73,767 head) of the total weekly purchase being committed for the nearby delivery -- this week's success is going to largely depend on how short-bought packers believe they are.

If packers believe they need to secure more inventory, then there's a chance the board will see fundamental support and elect to challenge the market's resistance. But there's an equal chance -- if not greater -- the market will trade lower as the fundamentals may not be as robust this upcoming week.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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