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Corn – was off to the races again this morning trading as much as .13 3/4 higher at one point. Noon rolled around and corn couldn’t hold its gains as we backed off to only up around .05 on the day. The action that we had on the chart today was a test of the 50% retracement back to the $4.02 high and we pretty much topped at that point. It looks to me like we should see a continuation of the weakness tonight and most of the day tomorrow.
If we don’t close above $3.73 in the July ‘10 contract tomorrow then this weeks action would suggest we could see sideways trade for awhile. Our upside targets for the SHORT-TERM is $3.77 3/4, $3.83 and $4.02. If you have old crop corn to sell now would be a good time to place open orders to sell. If you already own corn for feed and the market rallies now would be a great time to place good till cancel orders to buy puts where you got long but at a cheaper price than where it is today.
For example, lets say you bought July ‘10 corn futures at $3.60. Lets say the $3.60 put option (opens your downside back up) settled at .13 3/4 today. I would place an order to buy that $3.60 put at .05 so if the market rallies .20-.30 cents you should get a fill at the lower price and now you have unlimited downside again. This is a good strategy if you hedge corn and exit the hedges when you buy the cash. More aggressive folks may want to buy a put option at a higher strike price after the rally, it really depends on your situation.
The $3.55 buy signal in the July ‘10 contract is still in place and good for now. The protective sell stop will be at $3.61 1/2 for tomorrow.
Bottom line – The intraday charts suggest corn makes an early high tomorrow. Now is a good time to buy call options on corn and buy cash hand to mouth until fundamentals change.
Meal – was lackluster at best today as we started the day trading better but couldn’t get a good rally going. Nothing has changed from my comments yesterday. See yesterday’s comments below.
Meal gained back some of the losses we had yesterday but nothing to make me think yesterday was a fluke. I am of the opinion that meal is making a short-term top for the next 30 days or so and then we can look for more direction. Meal, like corn, still allows profits to be locked in on hog production. Now is a great ti me to buy call options just like I said in corn and buy meal hand to mouth OR if you are worried about basis levels narrowing then buy the cash product and purchase puts. Hogs are on slippery ground technically and could experience a sell off and if that happens the producer margins will shrink if corn and meal move higher. Make business decisions.
Bottom line – The intraday charts suggest meal makes an early low tomorrow.
Hogs – June hogs were up early in the day today but that was about it as we traded near unchanged for most of the day until noon rolled around and we sold off. I’ve been talking about the $83.75 area for the past couple of days and we got a challenge of that number today as we made a low of $83.65 but bounced back above $83.75 almost immediately. The cutout was up over $1.00 this afternoon on decent volume for a Thursday so the extended afternoon session has June ‘10 hogs trading near even for today or up .775 for tomorrows trade, which ever way you want to look at it.
The June ‘10 contract is in really testing this $84.00 to $83.75 area and looking to break through to the downside. Now, if we don’t get through to the downside then I think we get a mass of buying and go back toward the contract high of $87.80. I’m of the opinion that we still try and challenge the downside some more. The U.S. Dollar Index was lower today and taking a breath after the big run up we’ve had this week as well as the Dow Jones rallied by 122 points on the day to take back some of its losses from earlier in the week.
The June ‘10 contract tried to rally early this morning as it make the session high during the first hour of trade and then fell to pieces for awhile until some buying surfaced. According to a source on the floor the June ‘10 contract sold off with ease because of the lack of buyers and some fund selling before some of the buying came back into the market around $1.05 lower. I said yesterday that the June ‘10 contract needs to stay above $83.75 for the week otherwise it could trigger some big selling below the market.
I’ve said my gut feeling was negative toward the Jun ‘10 contract and I’m still in that camp. I would suggest having a contingency plan to sell if the market takes a nasty turn and keeps going. If you don’t want to sell then at MINIMUM buy some put options or a known risk strategy should be used to protect profits as well as protect against any events that have the possibility of popping up like H1N1 proved to us last year.
Bottom line – The intraday charts suggest hogs make an early low tomorrow.
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.