Hog & Corn Comments – 10/21/09 Cutout down $.60 after a higher hog close
Oct 21, 2009
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CORN – Dec ‘09 Electronic
Open – $3.84 1/4, High – $4.03 3/4, Low – $3.81 1/4, Close – $3.98 1/4 Up $.13 3/4
Thoughts – Long Term (into December ‘09) – Sideways
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Dec ‘09: Dec '09 corn wasted no time today as it moved higher right out of the gates and never really looked back. We made new high's early above $3.89 1/2 and kept going from there on good volume. The market is very weary of the weather and the dollar index making new lows help fuel buying as well. Crude oil made a new high today as well trading near $82.00 a barrel in the lead contract month so it too painted a friendly picture for today's trade session in corn.
I stopped out of our short delta hedges we entered into yesterday on the open near where we shorted them yesterday and purchased some corn contracts to add to our net long position that we have in our call spread. Our call spread runs out of coverage at $4.00 so this is why we are adding long futures to keep our delta at a level that we are comfortable being long. As I said yesterday if we get two closes above $3.88 in the Dec '09 corn I will have to adjust my skeptical opinion of corn and respect the technical side of the market place. Today is the first close above the $3.88 level so it needs to close above this level again tomorrow for me to be truly friendly. I am still adding to our long positions to keep good coverage in place and will manage our positions as it pertains to risk more so than where we think the market is headed.
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 10-22-09
(R3) Resistance 3: $4.28 1/4
(R2) Resistance 2: $4.17
(R1) Resistance 1: $4.07 1/2
Today’s close: $3.98 1/4
(S1) Support 1: $3.85
(S2) Support 2: $3.71 3/4
(S3) Support 3: $3.68 1/4
MEAL – Dec ‘09 Electronic
Open – $293.00, High – $302.70, Low – $292.20, Close – $298.70 Up $6.20
Thoughts – Long Term (into November ‘09) – Sideways/Higher
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Dec ‘09 meal: Meal didn't make it down to the 288.90 support level I was expecting and I don't think we will get there tomorrow either based on the way we closed today and the way the intra-day charts look. As I said yesterday the weekly chart left us with a negative close last week and the daily chart is showing a cycle high but this market is tied closely with the weather and again the dollar is weak and could be attracting new inflationary hedge money into commodities.
We still hold our call spread as we have upside to $320.00 in the Dec '09 contract and if we reach this level then we will re-adjust but for now we will take a wait and see attitude because of the negative signs in the shorter-term charts.
Bottom line: I’m looking for the market to experience an early low and late high tomorrow.
Dec ‘09 Meal – Support/Resistance for 10-22-09
(R3) Resistance 3: $318.90
(R2) Resistance 2: $308.40
(R1) Resistance 1: $303.50
Today’s close: $298.70
(S1) Support 1: $293.00
(S2) Support 2: $287.40
(S3) Support 3: $276.90
HOGS – Dec ‘09 GLOBEX
Open – $53.20, High – $54.05, Low – $52.975, Close – $53.65 Up $.80
Thoughts – Long Term (into December) – Negative
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Dec ‘09 hogs: Dec hogs can't seem to make up its mind as to which direction to go. The market started higher early and had a rather narrow trade range for most of the day similar to what we've experienced over recent days with the exception of yesterday. The noon cash report showed cash lower by nearly $3.00 on the National report, however, the noon report seems to lean toward one extreme or the other and then come in line for the afternoon report.
The sell signal that I spoke of at $54.725 yesterday is still in play but if we touch $55.45 then the signal is gone and I would expect the market to continue to rally toward $59.15 if that were to happen. I am holding with a negative bias toward the market as I believe most of the buying is related to inflationary money flow more so than the actual strong demand for pork. We are not that far above the cash index so we are not extremely over priced unless you look at where futures are in relation to the cash index during this time of year then it would say futures are too high.
We maintain hedges with call options against them to give us the upside in the market. As I've stated for some time now, I think this is an excellent time to get some downside protection in place on hogs that need to be hedged and would still use a known risk strategy as a hedge vehicle.
Bottom line: I’m looking for the market to make an early low tomorrow.
Dec ‘09 Hogs – Support/Resistance for 10-22-09
(R3) Resistance 3: $55.80
(R2) Resistance 2: $54.75
(R1) Resistance 1: $54.35
Today’s close: $53.65
(S1) Support 1: $53.275
(S2) Support 2: $52.60
(S3) Support 3: $51.50
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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