CORN – July ‘09 Electronic
Open – $4.04 1/2, High – $4.08 3/4, Low – $3.97 3/4, Close – $4.07 3/4 Up $.03 3/4
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Monday I said: “I was dead wrong on market direction last week based on the comments from above. The U.S. dollar index has moved higher which gives the negative effect on commodities for now which allowed the corn market to fall as much as it has. I mentioned in the above paragraphs that I purchased a short-term put spread to hedge against lower prices in corn and protect equity in feed positions, it felt pretty good today having that position on! I did exit that position at $.18 which was up from the $.05 1/2 entry price, this profit allow us to offset the losses in the short put positions we have in an August 3 way call position. I moved the August 3 way call from $4.60 down to a $4.20 so we are closer to the market in the event we rally from here.
July corn closed below the 50% retracement level today ($4.10) and just above the 62% retracement level of $4.00 1/2. If the market wants to make another move toward the $4.50 high then we need to stay above $4.00 1/2 for sure but a closing above $4.10 would provide greater odds of a re-test. If we move below $4.00 1/2 and close there for two consecutive days then I would look for a test of $3.70. I have a buy signal in the July ‘09 corn at $4.07 stop. If I were to buy futures here (I’m not because we own a call strategy) I would have a risk management sell stop at $4.04 but as I mentioned before we have a call strategy in place which gives us more time and flexibility in our position than futures do.”
July ‘09 corn: July ‘09 corn need to stay above the $4.00 1/2, 62% retracement level if it had any chance at holding off any further declines. From a technical perspective, July corn had a very good close today as it tested the $4.00 1/2 by making a new low at $3.97 3/4 and bouncing right back up to close near the high of the day. This type of action is characteristic of a market looking to find a bottom for the most current move. I am looking for corn to open steady to lower tonight and have a small setback before it finds support once again and makes a charge higher tomorrow.
If the July ‘09 contract gets back above $4.10 (50% retracement level) and closes there for two consecutive days then I feel more confident in saying we could make another run toward $4.50. I am expecting tomorrow to have buy stops around $4.09 1/2 to $4.10 which is where our resistance level is at; if we can break through this level we should see follow through buying and take us higher on the day. Although it is early to make this statement but it feels like today may have stopped the decline in corn prices and if we can get a close above $4.08 3/4 (I prefer $4.10) for the day I will feel much better about saying we have bottomed for this most recent downward move. The funds have liquidated around 18,000 contracts of corn since last Friday (they were net buyers today) but they still hold on to approximately a 190,000 contract net long position.
Bottom line: I am looking for the market to experience an early low and a late high tomorrow.
July ‘09 Corn – Support/Resistance for 06-18-09
(R3) Resistance 3: $4.12 1/2
(R2) Resistance 2: $4.10
(R1) Resistance 1: $4.08 3/4
Today’s close: $4.07 3/4
(S1) Support 1: $4.03 1/4
(S2) Support 2: $4.01 1/2
(S3) Support 3: $3.97 3/4
MEAL – Aug ‘09 Electronic
Open – $371.00, High – $375.70, Low – $367.30, Close – $373.10 Up $1.30
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Monday I said: “the meal market hasn’t dropped as much as corn has on a percentage basis but it has backed off of its highs no different than most all commodities after the rally the dollar has mounted over the last couple of trading sessions. The August meal contract is at support at $372.00 and we close slightly below it today, if this number is breached and we have two consecutive closes below this level then look for $356.70 to be tested. Similar to corn I have a buy signal in the August ‘09 meal contract at $371.50 on a BUY STOP IF the August contract can make new lows below $370.50. If the market does meet the conditions of the buy signal then a risk management sell stop should be placed $.50-$1.00 below the most recent low.“
Aug ‘09 meal: I said Monday that we had a buy signal at $371.50 if the market made a new low below $370.50 which it did yesterday and it triggered the buy stop at $371.50. The risk management sell stop should be $1.00 below the most current low at the time of the fill, the current low at the time was $366.10 so the risk management sell stop should be at $365.10 for now and then trail that stop $1.00 below the prior day low until an upside target is met or the sell stop is triggered.
If this signal is good it should produce a violent move higher in the August meal contract. I haven’t adjusted my positions at all as I still have my $360.00 August calls in place with upside to $400.00 in the August contract for now. I am looking for more upside in the August contract tomorrow and I believe we could see buy stops above the market near the $376.50 area.
Bottom line: I’m looking for the market to experience an early low and a late high tomorrow.
Aug ‘09 Meal – Support/Resistance for 06-18-09
(R3) Resistance 3: $382.50
(R2) Resistance 2: $380.20
(R1) Resistance 1: $375.40
Today’s close: $371.80
(S1) Support 1: $370.50
(S2) Support 2: $368.30
(S3) Support 3: $356.70
HOGS – Aug ‘09 GLOBEX
Open – $58.10, High – $59.65, Low – $58.10, Close – $59.55 Up $1.45
Thoughts – Long Term (Into August) – Friendly
Monday I said: “The hog futures continue on the path of least resistance which is, you guessed it, lower. Cash prices were slightly better per the USDA noon report but that didn’t seem to bother the futures at all. Most commodities were lower today mostly as a result of a much stronger dollar over the past two trading sessions so why would an already weak market (hogs) have any reason to go against the crowd and move higher.
August once again closed at new contract lows and has no interest in changing direction at this time. I have a cycle low projected for this Thursday and then firmer trade moving into the 4th of July time-frame. Keep in mind these cycles are projected into the future based on historical trade so take what I am saying with a grain of salt, the market has proven that it doesn’t need to do anything! I have nothing good to say about the hog market at this time and I will continue to look for reasons to get excited but for now I don’t see any. I still feel like we are near a bottom but we need some good news from the export market to really get cutout going but until then I think the market just grinds lower until it has something solid to stand on and move higher.”
Aug ‘09 hogs: Ouch, the cutout came in $2.77 lower this afternoon and the market immediately sold off in extended hour’s trade but then seemed to find some support around $58.80 and bounce back. Hmmmm, I have a cycle low projected for tomorrow on the daily chart but with this news coming out it makes me wonder how accurate it will be. Loins and hams took a bath today which is the reason for the lower cutout. If the market shrugs this lower cutout number off tomorrow then that would be the nail in the coffin to say the market could be done to the downside for now.
It is interesting to see bids appear when this negative news comes out, like someone is trying to bait us with negative information so they can buy back short positions without it pushing the market a lot higher. The reason I point this out is because I doubt speculators are coming in buying the market by 10’s and 20 lots after a cutout number like this is posted, it is almost as if someone knows something just like if this number is for real I would think that someone would’ve had leaked information today during the day session. I ended up selling some July futures within seconds of the cutout number being released just to give me a head start going into tomorrow’s session. I may exit them tomorrow if there is no need for them.
Bottom line: I’m looking for the market to make an early high tomorrow.
Aug ‘09 Hogs – Support/Resistance for 06-18-09
(R3) Resistance 3: $60.80
(R2) Resistance 2: $60.325
(R1) Resistance 1: $59.675
Today’s close: $59.55
(S1) Support 1: $58.625
(S2) Support 2: $58.40
(S3) Support 3: $57.625
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