Hog & Corn Comments – 10/27/09 Hogs rally and feed grains retreat
Oct 27, 2009
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CORN – Dec ‘09 Electronic
Open – $3.78 1/4, High – $3.80 3/4, Low – $3.69 1/4, Close – $3.70 3/4 Down $.07 1/4
Thoughts – Long Term (into December ‘09) – Sideway/Lower
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Dec ‘09: Dec ‘09 offered some follow through selling today but nothing like yesterday's sell off. We didn't even get close to the $3.88 resistance level that I spoke of yesterday so unless the weather changes once again it looks like we can stick a fork in this corn market because it looks like it is finished for now. We should move toward the 50% retracement level of $3.57 3/4 in the near future to see if it can hold support, if not then we look for $3.44 1/2.
We still have call spreads in place and will continue to do so for now until the sold $4.00 call option we have gets to a low enough price where we can buy it back which would leave us with a straight call option.
Bottom line: I am looking for the market to experience an early low tomorrow.
Dec ‘09 Corn – Support/Resistance for 10-28-09
(R3) Resistance 3: $3.96 1/2
(R2) Resistance 2: $3.85
(R1) Resistance 1: $3.78
Today’s close: $3.70 3/4
(S1) Support 1: $3.66 1/2
(S2) Support 2: $3.62
(S3) Support 3: $3.50 1/2
MEAL – Dec ‘09 Electronic
Open – $295.50, High – $297.00, Low – $287.80, Close – $287.80 Down $7.00
Thoughts – Long Term (into November ‘09) – Sideways/Lower
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Dec ‘09 meal: Meal had a pretty quiet day with a very small range until 11:30 a.m. CST then the market headed south. I'm now looking for a test of $283.40 for now and if this area of support doesn't hold we should test $266.10. I'm not adding much to today's comments that I haven't talked about over recent day's but in summary we are on the sidelines in meal for now until the market shows us a reason not to be. We have the luxury of changing our mind at any time prior to making any posts in this blog so please do what is right for your operation.
Bottom line: I’m looking for the market to experience an early low and late high tomorrow.
Dec ‘09 Meal – Support/Resistance for 10-28-09
(R3) Resistance 3: $300.00
(R2) Resistance 2: $293.80
(R1) Resistance 1: $290.80
Today’s close: $287.80
(S1) Support 1: $284.60
(S2) Support 2: $281.60
(S3) Support 3: $272.40
HOGS – Dec ‘09 GLOBEX
Open – $53.85, High – $55.675, Low – $53.45, Close – $55.425 Up $1.975
Thoughts – Long Term (into December) – Negative
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Dec ‘09 hogs: Dec hogs shot higher this morning on good volume and broke out above the $54.95 range with continued buying but then halted around $55.675 and fell back below $54.95. I have to say I am so confused by the way this market is trading. I search for fundamentals to accompany the higher prices but I fail to find anything to cause any major long-term excitement. One thing that looks possible to me now is the potential for a broadening top pattern, this means we've moved higher and now have made higher highs and lower lows as time passes. This is typical of a reversal setup which would coincide with the other indicators I look at. To say we are in a broadening top pattern currently is premature as it needs more time to form if we are truly in this type of a pattern.
With Dec hogs now closing above $54.95 and assuming we close above this level tomorrow, the market should target $59.10 from a technical perspective. The volume for today's trade was of good size so there was some backing to this rally and if we take out today's high tomorrow we should expect more buy stops to be triggered, however, the hourly chart says we should have our high near the open tomorrow then drift from there.
I still think this is a great opportunity to employ some hedges in the Dec contract via a known risk strategy because the market isn't acting the way it looks like it should based on the indicators that I follow. We continue to have synthetic put options in place to give us downside hedge coverage and unlimited upside in the market. As I've said for the last few posts it looks like the U.S. Dollar Index is still searching for a bottom in here and thus far has found one. I see the Dollar bottoming out for now and moving higher in the coming weeks unless we close back below the most recent low of 74.94 for two consecutive weeks.
If the Dollar does indeed find its bottom it should slow some of the outside buying that has come into the market over the recent weeks. I also have to say that I am not a big fan of the stock market at this level either, we have a chance of testing 10,340 the 50% retracement level back to the 14,198 high but if we close below 9,630 by Friday October 30th, that could spark additional selling that could be significant in nature. The Dow Jones setup is a conditional one so please don't take what I write as a recommendation, I include it in my comments as a general overview of the markets as a whole and how it could impact the hog industry and pork sales.
Bottom line: I’m looking for the market to make an early high tomorrow and weaken as the day progresses.
Dec ‘09 Hogs – Support/Resistance for 10-28-09
(R3) Resistance 3: $55.40
(R2) Resistance 2: $54.40
(R1) Resistance 1: $54.00
Today’s close: $53.425
(S1) Support 1: $53.00
(S2) Support 2: $52.40
(S3) Support 3: $51.40
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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