Hog & Corn Comments - 10/13/09 Cutout up $1.65, hogs continue firm tone.
Oct 13, 2009
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CORN – Dec ‘09 Electronic
Open – $3.79, High – $3.86 3/4, Low – $3.74 1/4, Close – $3.81 3/4 Up $.00 1/2
Thoughts – Long Term (into December ‘09) – Sideways
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Dec ‘09: Today was the second day that we have closed above the $3.76 number I spoke of in my last post. We are currently long a call spread for the time being in the corn market to give us upside coverage. We exited our in the money call strategy today to take the equity off the table so we don't have to give it back if the market moves lower from here. I am reluctantly friendly to the corn market because of the closes above $3.76, however, I have a cycle high projected for this week which is why we are trying to take equity off the table and limit risk in the event the market moves lower.
The crop ratings were out tonight and unchanged from last week where the trade was looking for a small reduction in condition. The harvest rate is 13% complete and but the trade was looking for a little higher than that so all in all the afternoon report was uneventful. The U.S. Dollar Index continues to move lower as it made a new low for 2009 today and continues to test the 75.89 low of Sept 2008. If the market Index moves below this level and closes there for two consecutive weeks we could see a run toward the historical low of 72.698. I do have a cycle low projected in the next couple of weeks which makes me think we have a shot at holding this support level for now and making a correction higher. All bets are off if we close below $75.89 for two consecutive weeks though!
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 10-14-09
(R3) Resistance 3: $4.05 3/4
(R2) Resistance 2: $3.93 1/2
(R1) Resistance 1: $3.87 1/2
Today’s close: $3.81 3/4
(S1) Support 1: $3.75
(S2) Support 2: $3.68 1/2
(S3) Support 3: $3.55 3/4
MEAL – Dec ‘09 Electronic
Open – $306.50, High – $311.40, Low – $303.60, Close – $306.30 Down $1.00
Thoughts – Long Term (into November ‘09) – Sideways/Higher
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Dec ‘09 meal: We had less than impressive trade today as the market closed nearly where it opened and is a potential downside reversal signal. I would expect to see sell stops below $303.60 tomorrow based on the trade we had today. The longer-term cycles still point higher but the market may be overdone to the upside for now considering we've moved $45.30 from low to high in the Dec '09 contract in seven trading days.
The most the Dec meal contract has rallied from Oct 1 to Nov 1 since 1989 is $49.50 which was a 24.44% move for the year of 2003; the average is 7.67%. If Dec moved 24.44% this year off of the Oct 1 close it would put the market at $349.40 vs. the 306.30 close we had today.
I am still friendly the soybean meal market because of the seasonal aspect as well as some longer-term cycles but I want to be somewhat cautious at these levels therefore we remain protected with our call spread strategy so we know our risk.
Bottom line: I’m looking for the market to experience an early high and late low tomorrow.
Dec ‘09 Meal – Support/Resistance for 10-14-09
(R3) Resistance 3: $322.70
(R2) Resistance 2: $314.90
(R1) Resistance 1: $310.60
Today’s close: $306.60
(S1) Support 1: $302.80
(S2) Support 2: $299.30
(S3) Support 3: $291.50
HOGS – Dec ‘09 GLOBEX
Open – $54.20, High – $54.325, Low – $52.675, Close – $53.675 Down $.15
Thoughts – Long Term (into December) – Negative
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Dec ‘09 hogs: We have our second day close above $53.10 today with the market settling at $53.675. I am reluctantly friendly the futures here because of the technical developments but I still don't think this rally is fundamentally sustainable until we start to move more product at higher prices. The cutout was up $1.65 today with approximately 110 loads moving which is decent volume for a Tuesday. I do have a warning sign in the Dec '09 chart that says if you are long be cautious. It isn't a sell signal it is a warning signal.
As mentioned in previous posts we still have more fund buying that is scheduled to come into the market over the coming weeks. This has been known for a while now so we have experienced some short covering coupled with fund buying. The US Dollar Index on its low helps the argument that we could see some fresh export business come in to play and help reduce some of the supply we have on hand.
I am still of the opinion that now is a great time to be adding hedges through known risk strategies for those that have nothing covered. The Dec '09 contract has a $3.00 lead on cash when it is typically below the cash market so either the futures need to come down or cash needs to come up to get this thing straightened out.
Bottom line: I’m looking for the market to make an early high tomorrow because of the cash and cutout numbers coming in higher.
Dec ‘09 Hogs – Support/Resistance for 10-14-09
(R3) Resistance 3: $56.65
(R2) Resistance 2: $55.20
(R1) Resistance 1: $54.45
Today’s close: $53.675
(S1) Support 1: $52.80
(S2) Support 2: $51.90
(S3) Support 3: $50.25
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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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.