8/5/16 was down -0.50 to 69.72. The VVVs are now discounted to the component by 10.24 and the QQQs are discounted by -2.24. Not much time left on the QQQs but plenty of time of the VVVs. Packers are bidding down day-after-day. With the high kill rate and the weak cut-outs this down trend may continue. At least that is what traders are thinking to have priced the "Gap" at more than ten points.

I was a surprised at the strength in the VVVs this morning but I shouldn't have been. So often when there is a significant "Gap" there will be a near limit move toward the closing of the "Gap". Looking at the fundamentals, I can understand traders being nervous about the drag the firm kill rate is going to have on demand and packers have to sell the product in order to pay for hogs.

The 6-day moving average carcass firmed to 208.31#. That is -1.51# year/year. Both packer hogs and non-packer hogs were a little heavier. Pzcker hogs came in +0.58# over non-packer hogs. Index hogs continued to be lower at 207.57#.

The rally this morning rattled my nerves but I am still short the VVVs.

Best wishes,

dhm