Hog & Corn Comments - 10/29/09 China to resume imports of U.S. pork.
Oct 29, 2009
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CORN – Dec ‘09 Electronic
Open – $3.69, High – $3.81 3/4, Low – $3.67, Close – $3.79 1/2 Up $.10 1/2
Thoughts – Long Term (into December ‘09) – Sideway/Lower
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Dec ‘09: It seems as though yesterday's low was good enough for this move as we rallied higher today partially based on a wetter forecast model that showed up on the noon run. The model that suggests more wet weather for the Corn Belt late next week is less than reliable that far out but will be monitored with each passing run. I said yesterday that I thought we could bounce as high as $3.88 3/4 but I don't think that is likely for tomorrow based on the way we traded today.
At this point I am still of the opinion that rallies should be sold until we get a good consensus of wetter forecasts and the harvest indeed is delayed further than it already has been. I am sure quality will be the next issue when the wet areas actually get into the field but until then I am going to keep a skeptical attitude toward corn. I still want the upside covered in the event I am wrong because as I've said before, what I think the market is going to do and what it actually does are two different things! We need the upside on corn protected in our case.
Bottom line: I am looking for the market to experience an early high tomorrow but it is the end of the month so anything could happen.
Dec ‘09 Corn – Support/Resistance for 10-30-09
(R3) Resistance 3: $4.05 1/2
(R2) Resistance 2: $3.90 3/4
(R1) Resistance 1: $3.85 1/4
Today’s close: $3.79 1/2
(S1) Support 1: $3.70 1/2
(S2) Support 2: $3.61 1/4
(S3) Support 3: $3.49 1/2
MEAL – Dec ‘09 Electronic
Open – $290.80, High – $296.30, Low – $289.50, Close – $295.30 Up $4.00
Thoughts – Long Term (into November ‘09) – Sideways/Lower
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Dec ‘09 meal: Meal had some follow through today but nothing like it should based on the buy signal we had yesterday so I took the equity on the futures we purchased yesterday and we are back on the sidelines for now. I fully expect to be in the market again if the market shows signs that we should but for now it seems like meal is having a tough time moving higher at this level. I could easily change my mind tomorrow but for now we are on the sidelines.
I am looking for the market to take a break from the upside tomorrow and drift back toward the $288/$290 area before finding support. I will be monitoring the situation closely though. Weather will still be the deciding factor in the direction of meal as it will be with corn but for now it feels like we have done enough to the upside for the time being (very short-term) and I am looking for a test of the $288.80 support level again in the near future.
Bottom line: I’m looking for the market to experience an early high and late low tomorrow but like I said in corn it is the end of the month so anything can happen.
Dec ‘09 Meal – Support/Resistance for 10-30-09
(R3) Resistance 3: $307.30
(R2) Resistance 2: $300.50
(R1) Resistance 1: $297.90
Today’s close: $295.30
(S1) Support 1: $291.10
(S2) Support 2: $286.90
(S3) Support 3: $280.10
HOGS – Dec ‘09 GLOBEX
Open – $56.00, High – $57.625, Low – $55.80, Close – $57.20 Up $1.25
Thoughts – Long Term (into December) – Negative
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Dec ‘09 hogs: Dec hogs got off to a quick start this morning as word broke publicly that China was going to resume U.S. pork imports. This is a game changer for the hog market in my opinion, if and WHEN it happens. It seems as though some traders already knew about the announcement and had positioned themselves prior to the new release but some are also very skeptical of the significance of the announcement. Until meat starts leaving the U.S. and is delivered in China I think this news will be on people's minds but they have a show me type attitude towards it all.
Hogs posted another high today as the futures continue to roll higher after taking out the $54.95 resistance level the other day. I've said before that if $54.95 resistance was broken and confirmed with two consecutive closes above this level that we could see a test of the $59.10 area. At this point it looks likely that $59.10 is our next objective point on the charts and today's heavy volume suggests there are plenty of people that think higher is the preferred direction.
We exited some of our short futures this morning prior to the open of the pit trade and will be looking for a place to sell them against our long $52.00 calls in the Dec '09 contract. The U.S. Dollar was weaker today, crude was up as well as feed grains so higher was the path of least resistance. I am concerned with how the market traded after the pit session opened, we didn't continue to move higher like I thought we would, the market just hung out.
I have to say the last 12 months or so have been the weirdest period of time I have been through in the hog market. Nothing seems to make sense anymore but I guess we either adapt or get left in the dust. There are so many issues out there that could send this market in both directions but the question is which way? I am still a fan of using know risk strategies to protect prices at these levels at minimum on an incremental basis, there seem to be too many unknowns to take an extremely aggressive approach in the market one way or the other unless you happen to be wildly profitable.
I will be monitoring hogs very closely and looking for signs of weakness (they have been reliable as of late -insert sarcasm here-) to adjust our position but for now we are on the sidelines with some of our synthetic puts still in place. I was looking for the market to be sideways to lower today but the China story took care of that noise but tomorrow it looks like we should start out strong with higher cash and cutout values to accompany the Chinese news but it feels like the high should be in place early in the session.
Bottom line: I’m looking for the market to be sideways to lower tomorrow.
Dec ‘09 Hogs – Support/Resistance for 10-30-09
(R3) Resistance 3: $60.20
(R2) Resistance 2: $58.75
(R1) Resistance 1: $58.05
Today’s close: $57.20
(S1) Support 1: $56.225
(S2) Support 2: $55.10
(S3) Support 3: $54.20
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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