The Feeder Cattle trail
The Feeder Cattle contract has been gaining in prices this year, until it topped last September, when the November contract reached 119.675 cents. Since then the price has been decreasing in a steady manner until it reached 108.5 cents on Friday last, a price difference yielding 5,425 USD per contract, loss for those who are long, but profiting those short.
Off course one would like to know if this is a temporary setback or a long term bear. On a short term basis, the signals are a bit mixed. 
The November contract did show a head and shoulder formation, starting with the left shoulder on July 31st, followed by the head on the 6 of September and the right shoulder on the 26 of September. What’s worth noting, is the Doji star in the head. A small Doji star in a top, followed by a drop in prices like those in the November contract, is a strong reversal indicator. Just this, the head and shoulder plus the Doji, are a strong indicator of a bear in the forming.
What could hinder this bear in its formation, is the Slow Stochastic (SSTO) indicator showing a strong oversold state of the contract. This indicator gives a hint about a reversal to the upside. The question being, how strong this reversal will be. Another factor is the contracts expire date which is approaching, with all the longs liquidating their positions. What will happen in the following contract, will prices go up or will the longs wait on the sideline and look for more decisive reversal.
The answer might be in the long term chart. When looking at the monthly chart, an interesting formation can be seen. Since market top of August 2004, the Feeder Cattle has been stopping at a resistance level just under 120 cents. These top’s have been forming in or around the same months, or October 2005 and September of 2006 and 2007. 
This strong resistance has shown a high degree of a seasonal tendency and should be quite interesting from a traders point of view. According to this, the Feeder Cattle has topped for the year and next high to be seen from August to October 2008. The SSTO on the monthly chart is also indicative of lower prices, as the tops have been showing a decreasing level with the charts being steady just under the 120 cents level. This shows a selling pressure in the market and should not be dismissed. The last top in the SSTO does go higher, but other indications diminish the possibility of a continuing bull market.
Extreme resistance on the monthly chart, coupled the strong head and shoulder on the daily chart, are strong indications that the Feeder Cattle market has topped for the year. There could be some reversal or sideways price movements the next days, but these can be seen as minor reversal and not strong for trading. On the other hand, if prices do move upwards and break the 120 cent barrier, a further price increase can be expected. But for now, all increases in prices can be said to be highly unlikely. The bears have arrived and further decrease in the prices should be expected. How far the prices will move is anybodies guess, but by looking at the monthly chart, a reversal has been seen in the prices just under 100 cents. A price drop to 100 can be expected.
So if you want to participate in the Feeder Cattle trail, I would suggest you head south.
