1-20-15 was down -$0.90 and the model projects that the CME INDEX component on the 1-20-15 kill will drop between -0.45 and -0.75. It appears to me that packers' margins are fairly good but they just keep lowering their bids day-after-day. They must be sensing that the inventory of hogs in producers' barns is quite high so packers are taking the occasion to widen their margins.

It appears that traders feel the down trend is going to continue because they have beat the GGGs down until they are discounted to the component by -2.22. That's not a huge "Gap" and can close in a hurry from either the index or GGGs side.

I'm continuing to look for a set-up that suggests it is time to get long the GGGs. Maybe bottom picking was in order yesterday and I missed it but the continuing down-trend in both the CME Index and the Purchase Index makes me nervous about getting long. I do have a short spread with a long Feb cattle. Without carefully looking at the hog data I would have been tempted to take a few tics on that spread and calling it quits. But the down tic in the Purchase Index has me thinking that there is more weakness coming to the CME Index and that may carry the GGGs lower. Cattle numbers are still weak. I'm still willing to be patient as the cattle market sees if it can gain a little more and or the GGGs will show a little more weakness.

Best wishes,

dhm