CORN – Sep ‘09 Electronic
Open – $3.96, High – $3.99 1/2, Low – $3.89 1/2, Close – $3.95 Down $.02 1/4
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Monday I said: “I made comment last week that if July ‘09 closed for two consecutive days below $4.00 1/2 that I was looking for a test of $3.70 and today was the second close below that mark and we got within $.10 of the target today. Crude oil has taken a tumble of over $4.00 a barrel in the face of the protests in Iran and also the talk of the possibility of the U.S.S. John McCain intercepting the North Korean ship, Kang Nam. The U.S. Dollar Index has once again gained some strength and is forming a bit of a wedge type pattern on the daily chart which would suggest a breakout of whichever side comes first, up or down. On the weekly chart the U.S. Dollar Index is pausing and waiting to make another push lower toward its most recent low of 78.35 as it has respected all of the technical resistance points in this last move higher over the past four weeks.
As a risk management move on Friday I purchased some July $3.90 puts for $.02 1/2 to protect the short $3.70 Sept ‘09 puts I have in place against the call strategy we have in place for upside coverage on corn. I didn’t have a “hunch” the market was going to move lower I just knew that that way the market was trading near the $4.00 1/2 level and there was uncertainty over seas so I purchased this puts from a pure risk management perspective. In my mind if we were wrong we still had upside in the market and if the market did drop we continue to lower our price of corn.
As you may have noticed I have changed the contract month I will talk about to September 2009 instead of July ‘09. Most of the comments above are for July but from here on out they will be for September. The September contract seemed to find support $3.93 as we traded below this level several times today but failed to close below it in the hourly charts for the first three hours of trade. It looks to me like the market is looking for good support and something to hang its hat on and leads me to believe we may have done enough to the downside for now. I am looking for an early low and a late high tomorrow as we come off of a big move to the downside over the past week.
If we get to the $3.80 support level in the September contract I will most likely make an adjustment to our corn position and lower our price ceiling as doing so will be easier with the equity that will have been gained through the purchase of the $3.90 July ‘09 put.”
Sep ‘09 corn: Started the day with some enthusiasm on the open but almost immediately sold off from there. I had a small sell signal in the hourly chart that sold Sept ‘09 corn at $3.97 1/2 on a stop order with a protective buy stop at $4.00 1/2 which wasn’t touched today. I am not doing this trade against any positions I am just making it known that there was a signal. I haven’t made any changes to my base position of a 3 way call position with the $3.90 July ‘09 put in place for downside protection if the market decides to collapse.
I have to do something with the July ‘09 put option by Friday so I don’t get exercised into a short July ‘09 corn position which I do not want at this point. The market seems to be looking for a bottom as we have sold off below $3.90 each day this week only to come off of those lows and close the market above that price level. Sept ‘09 corn looks like it should have some additional weakness tonight in an effort to find more support.
The trade action we had today signifies balance and that the market is looking for direction from here. We are still in a downward trend although we have paused for the past couple of days so the thought is we still have some weakness to get through. I am looking for a test of the $3.80 area in the September ‘09 contract which may come in the form of a jab lower but overall I don’t expect much more downside pressure below $3.80 in the September contract.
Bottom line: I am looking for the market to experience an early low tomorrow.
Sept ‘09 Corn – Support/Resistance for 06-25-09
(R3) Resistance 3: $4.01 1/2
(R2) Resistance 2: $3.99 1/2
(R1) Resistance 1: $3.95 1/2
Today’s close: $3.95
(S1) Support 1: $3.94 1/4
(S2) Support 2: $3.92 3/4
(S3) Support 3: $3.89
MEAL – Aug ‘09 Electronic
Open – $361.00, High – $368.20, Low – $358.80, Close – $366.00 Up $4.40
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Monday I said : “The buy order that I’ve referenced over recent posts would have been stopped out of Friday at $370.50 for a $1.00/ton loss. If you remember correctly we moved our risk management stop from $365.10 to $370.50 which in this case would have saved a few dollars. Sometimes taking a loss can be the cheapest thing we can do in managing risk in a position because if there would have been any risk management stop order in place the loss would have gone from $1.00 to $19.20 on a position that could still be open!
We still have ownership of a call strategy that gives us upside from $360.00 to $400.00 in the August contract but we are not long futures until $320.00 in the August if we do nothing to adjust our short $320.00 put options. $346.70 is the 50 day moving average and probable target to the downside in the Aug ‘09 contract for now. The market seems like it may want to take a breath tomorrow and have an early low or weakness early and then find support and try to short-cover. IF the market gaps lower (opens below $351.10) and then moves higher there would be a buy signal generated at $351.60 STOP with a protective risk management stop $1.00 below the current low at the time the buy stop was filled.
The hourly chart suggests a quiet opening tonight and perhaps some small buying above $353.20 if the market gets there.”
Aug ‘09 meal: The buy signal I spoke of in the above paragraph was indeed good an accurate. The buy signal was triggered at $351.60 on Monday evening and from there a risk management stop order would follow each day’s low by $1.00 so for today it was $349.50 stop and tomorrow it would be $357.80 stop. I do not have this trade on because I have call strategies in place but I wanted to follow up with the statement I made.
The August contract has major support at $344.70 but the contract has acted well enough where we didn’t even get there to test it. We closed the at $366.00 today which is just above the 50% retracement level for the most recent move lower and provides a positive spin on the August ‘09 contract. We If we close above $365.30 tomorrow then I would expect a test of $368.80 and then $380.20 but we need another close above $365.30 first!
Bottom line: I’m looking for the market to experience an early high and a late low tomorrow.
Aug ‘09 Meal – Support/Resistance for 06-25-09
(R3) Resistance 3: $369.90
(R2) Resistance 2: $368.20
(R1) Resistance 1: $366.50
Today’s close: $366.00
(S1) Support 1: $364.50
(S2) Support 2: $361.10
(S3) Support 3: $357.40
HOGS – Aug ‘09 GLOBEX
Open – $59.875, High – $60.275, Low – $58.125, Close – $58.825 Down $1.625
Thoughts – Long Term (Into August) – Friendly
Monday I said: “ The August ‘09 contract wasn’t doing to bad this morning until the grain market opened and set the place on fire to the downside. The cash bids this morning came in lower but on very few hogs and by the end of the day the cash market was higher per the USDA. Cutout was down mildly tonight on a few loads similar to Friday but it WAS NOT down $3.00 or anything so we will take the small down moves of $.35 like we had today.
The general feel for the cash market seems to be at least steady as well as the product side of the equation therefore giving us some limited downside risk in price for the time being. We all know how fast things can change so be on guard! So far my cycle low signal for last week has been good and it has the market moving higher into approximately July 14th, 2009. I don’t see anything to get concerned over from today’s trade and actually the August ‘09 contract has held support and as long as we hold $60.525 tomorrow we should try to make another run toward $62.15 from Friday.
The monthly cold storage report was released today is showing a 5% reduction in frozen pork supplies from last month but up 1% from last year. Stocks of pork bellies were down 1% from last month and down 9% from last year. Click here to read the report from the USDA.”
Aug ‘09 hogs: If there is one market that can make misery last what seems to be forever it is the hog market and it was at it again today. The market responded negatively to the lower cutout number we had last night and I assume getting a jump on tonight’s lower cutout number (down $1.19). It is hard to even talk about this but I am going to because it is an objective observation of the chart, I have a buy signal in the August contract tomorrow on a conditional basis.
IF the August ‘09 contract trades lower than $58.10 then there is a buy stop generated at $58.60 STOP with a protective risk management stop $.50 below the most current low when the buy stop is filled, however, I would like to give the sell stop some room and place it below the contract low of $57.625 so I would make the order $57.125 stop.
Cutout was lower tonight but cash was near steady with a weighted average of around $57.65 and the July futures closed at $57.30, the August at $58.825 and the CME cash index settled at $58.55 today. The cutout still needs to come around and move the meat that we have if we ever want cash to start coming strong and until then I don’t expect much out of this market to the upside. Like I said before, I have a potential buy signal for tomorrow but I am not extremely confident in it therefore I would/will not trade it.
Bottom line: I’m looking for the market to make an early low tomorrow off of tonight’s lower cutout number but I think some of it was factored into today’s trade.
Aug ‘09 Hogs – Support/Resistance for 06-25-09
(R3) Resistance 3: $60.275
(R2) Resistance 2: $59.45
(R1) Resistance 1: $59.20
Today’s close: $58.825
(S1) Support 1: $58.65
(S2) Support 2: $58.125
(S3) Support 3: $57.625
Click here to view cash and cutout reports
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