Corn – I mentioned in my last post that corn produced two different buy signals in the May ’11 contract at $6.90 3/4. There was also another bullish setup as of yesterday’s trade along with a 50% retracement from Tuesday nights low. All things said and done and we got today’s action is is what one of the buy signals suggested would happen. It is evident that the signal was good and now I believe we will continue to run up and try and take out the high of $7.44 1/4 that we set on Monday evening.
There was good volume on buying days this week and today was no exception as the electronic May ’11 contract tallied 210,342 contracts. That’s pretty good when you have yet to figure in pit trade. The market looked like it closed weaker because of the minor sell off but all that does is create an environment for a possible weaker open on Sunday night and find support nearly right away and head higher. These statements are all possibilities and my opinion, please don’t trade off of my comments.
May ’11 corn produced two different buy signals today at the same price, $6.90 3/4. One signal is because we gapped lower overnight and then rallied back through yesterday’s low and the second is because of yesterdays and last week’s low being the same price. If the second signal is "good", which so far it is, then we could see a re-test of $7.44 1/4 which was the high on Monday evenings trade.
Bottom Line – Based on what we saw today I’m of the opinion that we see follow through to the upside in corn on Monday. I expect a soft opening on Sunday evening and then find buying. I’m looking for an early low Monday.
Meal – May ‘11 meal still has some technical work to do if it wants to keep pace with corn. I do have cycle lows being put in Wednesday of this past week and showing upward projections into the middle or third week of March. Looking at the weekly chart for the May ’11 contract it looks like the market wants to make another run at the high from a couple of weeks ago. We rejected lower prices this week and if we take out this week’s high next week then we could see some buy stops triggered. This week’s high was $371.90.
Bottom Line – Based on today’s action I’m looking for an early high on Monday before we make another run higher.
Hogs – Apr ‘11 hogs just triggered a buy signal that was good for yesterday and today although I have to say it was weak. It is the same signal that we had in corn the other day but the hogs don’t look as convicted as the corn did/does. The April ’11 contract closed below last weeks low which is the first time we’ve closed below a prior week low since the week of Oct 25th, 2010.
April has some pretty strong seasonal tendencies to head lower from the middle of February through the end of March. This is another reason why I’m a little skeptical of the buy signal that showed up yesterday and today. I’m not as negative to the deferred months just because of corn and meal prices keeping the buy pressure in play. We will also need that cash to come around if April thinks it has a shot of staying above $90.00 into its expiration on April 14th.
In summary I guess I want to be cautious with the April ’11 contract in hogs but the deferred contracts I still think have some room to move based on higher feed prices and the relationships between the two. Stick to business and make your marketing decisions based on your profits and life will be much easier!
Bottom Line – I’m looking for an early low in the April ’11 hogs Monday as we continue to search for market direction.
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