Hog & Corn Comments - 11/24/09 Feed grains continue their sell off
Nov 24, 2009
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CORN – Dec ‘09 Electronic
Open – $3.86, High – $3.87 1/4, Low – $3.74 1/2, Close – $3.76 Down $.11 1/4
Thoughts – Long Term (into December ‘09) – Sideways/Lower
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Dec ‘09: The corn market followed through to the downside today breaking through a key support level of $3.84 1/4 and $3.78. With the Dec corn closing below $3.78 it builds a case that $3.59 1/4 could be tested, however, I would like to see tomorrow close below $3.78 as well. I'm not sure if the index funds are taking a break for the holiday or if they have finished their buying in corn. It is so tough to say because yesterday's market suggested that all grains should have been higher judging by the outside markets but it didn't happen.
Technically speaking I see the corn market going lower but as I've said before the funds have a lot to say about what direction the market moves. $3.57 3/4 is the actual target area that Dec corn should shoot for if it makes a 50% retracement back to the $3.02 low. We already tested $3.59 1/4 once a few weeks back so if $3.57 3/4 doesn't hold this time we could see more selling to get the market to $3.44 1/2 and ultimately $3.02 but I'm not sure funds will let the market drop as far as $3.02.
We are still on the sideline with corn at this time and will be here until the market tells us differently. If you have good margins in hogs purchased don't waste, lock in your profits and use options for opportunity if it works for you.
Bottom line: I am looking for the market to experience an early low tomorrow.
Dec ‘09 Corn – Support/Resistance for 11-25-09
(R3) Resistance 3: $3.92
(R2) Resistance 2: $3.84
(R1) Resistance 1: $3.79 1/4
Today’s close: $3.76
(S1) Support 1: $3.71 1/4
(S2) Support 2: $3.66 1/2
(S3) Support 3: $3.53 3/4
MEAL – Dec ‘09 Electronic
Open – $315.60, High – $317.30, Low – $311.20, Close – $315.40 Down $.20
Thoughts – Long Term (into November ‘09) – Sideways/Lower
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Dec ‘09 meal: Meal experienced continued weakness today but not near as much as the corn market. The sell signal from yesterday at $319.50 is still in place but the market is acting like it is comfortable with the price level it currently at. Yesterday we started higher and sold off and today we started lower and experienced buying at lower prices so the market seems content with its current price level for the time being.
Even though the market seems balanced the overall look of the way we have traded the last several days makes me think we are still vulnerable to a retracement to lower levels. We are still on the sideline in meal and will continue to be for now.
Bottom line: I’m looking for the market to experience an early low tomorrow.
Dec ‘09 Meal – Support/Resistance for 11-25-09
(R3) Resistance 3: $326.80
(R2) Resistance 2: $320.70
(R1) Resistance 1: $318.00
Today’s close: $315.40
(S1) Support 1: $311.90
(S2) Support 2: $308.50
(S3) Support 3: $302.40
HOGS – Dec ‘09 GLOBEX
Open – $58.30, High – $58.95, Low – $57.775, Close – $58.625 Up $.325
Thoughts – Long Term (into December) – Neutral
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Dec ‘09 hogs: The Dec '09 hogs added to yesterday's rally in quiet fashion today as volume was low due to the Thanksgiving holiday. I spoke yesterday of a POTENTIAL island top if the market opened below yesterday's low of $57.975 but it didn't, it opened at $58.30 so that thought is null and void. The market did fill the gap it left on yesterday's open which is healthy for the market to do, however, the daily range from open to close is getting smaller as it moves higher and is a bit concerning for higher prices.
We are close to the $59.225 level of resistance I spoke of a few weeks ago but failed to reach. The high for today was within $.275 of this resistance level and I would expect an actual test of the $59.225 at some point in the near future. The cash market was higher this morning in IA/MN and if the cash market does continue to move higher we should see the lean hog index move higher and support the Dec '09 prices at current levels.
In my opinion, the weak dollar has provided the hog export business a boost and hopefully the exports will grow and get this industry back on its feet. The downside is if the dollar bottoms and moves higher we could see the exports back off but we could also see fund money leave commodities bringing both feed and hog prices down. Another downside thought would be as soon as profits return to the industry production may increase to try and make up for lost equity which could send us right back down the path of negative returns.
We continue to hold our short futures long call option position in the Dec '09 contract for now and will do so for the time being so we have downside risk protected in the market and the upside opportunity is completely open.
Bottom line: I’m looking for an early high tomorrow.
Dec ‘09 Hogs – Support/Resistance for 11-25-09
(R3) Resistance 3: $60.80
(R2) Resistance 2: $59.625
(R1) Resistance 1: $59.125
Today’s close: $58.625
(S1) Support 1: $57.95
(S2) Support 2: $57.275
(S3) Support 3: $56.10
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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