CORN - July ‘09 Electronic
Open - $4.43, High - $4.46 3/4, Low - $4.33 1/4, Close - $4.35 Down $.09 3/4.
Thoughts - Long Term (Into September ‘09) - Bullish/Higher
Last week I said: “The July futures didn’t open higher than $4.45 3/4 last night; therefore the potential sell signal on the daily chart was not valid and therefore never executed. I still had my orders in to buy July corn at $4.30 or $4.53, whichever came first, but I entered into a three-way option position instead. I did this because the market hasn’t fallen as much as I thought it would and the U.S. dollar continues to move lower in significant fashion. We made a late high today, which isn’t what I thought was going to happen and added to the reason for the options position I entered into today.
"Although we closed July '09 corn above $4.49 1/4, I want to see the market close above $4.49 1/4 for two or more days before I get extremely bulled up, but the dollar index makes a pretty easy case to be friendly. Tomorrow will be a key day in the market as the trade will be looking for additional buying above the $4.50 level, and if we close above $4.49 1/4 again tomorrow then I will be looking for a test of the $5.17 area over the coming weeks. Today I purchased Aug '09 $4.60 calls and sold Aug '09 $4.20 puts and Aug '09 $5.00 call options for a net premium of $.00. This position will give us upside coverage from $4.60 to $5.00 (need to adjust at $5.00 if we get there) and technically we will not be long corn (from a futures perspective) until September '09 corn reaches $4.20. Let me know if you have questions on this position, because it is more complex than the simple explanation I just gave you. There can be margin call implications.”
July '09 corn: The July didn't follow through to the upside last week like I thought they may. The U.S. dollar index took a break and has moved higher since June 3rd (last Wednesday when grains were down hard) and has been making its way higher just as corn has been making its way lower. Thus far, my buy objective of $4.30 that I mentioned above was hit as it was the low on June 4th and has held as our low for now. The July futures are testing the old resistance level, which is now support at $4.37, so this week's objective will be to close above this level if the market wants to continue higher. The ultimate goal for higher markets from here would be a close above $4.50 for a couple of days like I spoke of in last week's comments above.
It looks like corn will have some further downside or softness this evening and then make a move higher. We do have the monthly crop production report being released on Wednesday morning at 7:30 a.m. CST, which will keep the market tame to some extent going into this report. I think we will be range bound between $4.30 and $4.50 in the July '09 corn until we get our numbers on Wednesday and/or the U.S. Dollar Index makes a big move in one direction or the other. The dollar tested a recent high of 81.12 but is failing to hold that level thus far, and it is looking like the small rally we've had may be over. I still need to see today's U.S. dollar market close before I am confident of this thought, but for now if were to close as I write this, the chart looks like it's gearing up for another push to the downside.
Bottom line: I am looking for the market to experience an early low and a late high tomorrow.
July ‘09 Corn - Support/Resistance for 06-09-09
(R3) Resistance 3: $4.46 3/4
(R2) Resistance 2: $4.40
(R1) Resistance 1: $4.36 1/2
Today’s close: $4.35
(S1) Support 1: $4.33 1/4
(S2) Support 2: $4.30
(S3) Support 3: $4.27 3/4
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MEAL - July ‘09 Electronic
Open - $399.00, High - $403.90, Low - $394.90, Close - $401.70 Up $5.70
Thoughts - Long Term (Into September ‘09) - Bullish/Higher
Last week I said: “I haven’t changed my mind on meal. I don’t like the sell signal on the weekly chart, but the way the dollar is dropping, it is tough to not have some coverage in place because of the outside forces placed on commodities as a result of a weak dollar. I will continue to have a window type strategy in place until I see something that makes me want to adjust my position. As of right now, we have near $40/ton of upside and downside from the $360 level in the August '09 contract. I think the weak dollar is a bigger deal than what the ag sector is giving it credit for. We as producers and agribusinesses look at the markets from a fundamental perspective and sometimes prices and fundamentals don’t make sense, and I believe we are going back to that way of thinking.
"Fundamentals will always win in the end, but it is getting from point A to point B that provides confusion, and I believe that logic will once again become an irrational thought when trying to 'figure out' the markets from a fundamental perspective as long as the dollar keeps sliding.”
July '09 meal: As I mentioned last week about the sell signal I had on the weekly chart at $392.00, it is a tough signal to manage because it has two weeks to develop and if you are trying to use futures to manage the position, you could get stopped in and out of the market several times, which I believe would have happened at least once had a position been taken last week. As an update, the July '09 meal futures closed above the $392.00 sell stop area on a weekly basis, which means the signal is still good for this week, but if we do not close below $392.00 this Friday, then the signal is void. If this signal is good, then I would expect a violent move lower in the July '09 futures. At this point I am willing to be a little more aggressive with only four trading sessions left on this signal, so if I was long meal in futures (I'm not, I have options in place), I would place a sell stop (to exit a long position) at $392.00 in the July '09 with a protective buy stop to get back in the market $1.00 above the most recent high (in today's case, it would be $404.50 stop).
The July '09 meal market is showing signs of warning, but this is one of those markets where it isn't uncommon for these "warning" signals to show up, and as I've said before, a warning doesn't mean sell, it just means be on the lookout for a potential change in direction.
Bottom line: I’m looking for the market to experience an early high and a late low tomorrow.
July '09 Meal - Support/Resistance for 06-09-09
(R3) Resistance 3: $430.50
(R2) Resistance 2: $409.10
(R1) Resistance 1: $403.90
Today’s close: $401.70
(S1) Support 1: $400.50
(S2) Support 2: $398.30
(S3) Support 3: $394.90
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HOGS - Aug '09 GLOBEX
Open - $62.25, High - $62.52, Low - $61.25, Close - $61.52 Down $1.00
Thoughts - Long Term (Into August) - Friendly
Last week I said: “The June, July and August '09 contracts all closed down limit today on fears of continued weak product demand. I don’t have much to add from yesterday other than now that we closed two consecutive days below the $63.40 level I am looking for another leg down in the June '09 contract, part of which was included in today’s trade. Now, enough with the doom and gloom type talk, let’s keep things on a positive note and be objective. If any of the June, July or August contracts open lower this afternoon, then there will be a buy signal generated at $60.00 stop, $62.40 stop and $63.30 stop, respectively. PLEASE take note that these buy signals are STOP orders, which means the signal is CONDITIONAL as in we need the market to open lower and then move higher through today’s low before the signal is actually valid; thus the buy stop orders. The way things have been going in the hog market, I don’t think I would step in front of this market just yet. I want more confirmation that the downside is finished, so I would want to see tomorrow's close instead of acting on the potential buy signal.
"The dollar continues to fall and will eventually help the export market along with the return of Russian buying (when it happens) and also the funds are short near a record amount of lean hog futures. When the day comes where things turn, it looks like it could be swift and violent. The problem as always is when will this take place, and man, I wish I could tell you, but I would be lying if I said I knew. But the spreads in the market show some optimism in the deferred months.”
Aug '09 hogs: As you can see, I have made the move from talking about the June '09 contract to the August '09 contract because of the expiration we are going to see in the June '09 contract in the near future as well as the limited amount of time we have in the July '09 contract. August was having an OK day today until approximately one minute before the pit closed; it sold off to end the day lower by over a dollar. The cash market remains weak even though the bids varied this morning per the USDA's noon report. The trade is still questioning the cutout and when we will see the product market recover. However, it will be tough without some of our export markets we lost to the H1N1 flu hoopla.
There isn't much to say about the August contract other than we need to hold the support level (contract low) of $60.925 if we want to prevent another leg lower in the market. My cycle indicator is projecting a cycle low on June 17th for the August 2009 contract and has it moving higher into approximately July 7th. I am still impatiently waiting for the market to give us signs of optimism but it has failed to do so many times over in recent weeks. There is nothing to get excited about to the upside at this point other than it will be good if we can hold the $60.925 support level.
Bottom line: I’m looking for the market to make an early low tomorrow.
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June '09 Hogs - Support/Resistance for 06-09-09
(R3) Resistance 3: $63.475
(R2) Resistance 2: $62.525
(R1) Resistance 1: $62.10
Today’s close: $61.52
(S1) Support 1: $61.25
(S2) Support 2: $60.925
(S3) Support 3: New contract low.
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Hurley & Associates believes positions are unique to each person’s risk bearing ability; marketing strategy; and crop conditions, therefore we give no blanket recommendations. The risk of loss in trading commodities can be substantial, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. NFA Rules require us to advise you that past performance is not indicative of future results, and there is no guarantee that your trading experience will be similar to the past performance.
