Hog & Corn Comments - 12/15/09 Feb hogs up along with the dollar
Dec 15, 2009
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CORN – Mar ‘10 Electronic
Open – $4.07 1/2, High – $4.10, Low – $4.05, Close – $4.07 1/2 Down $.01
Thoughts – Long Term (into February) – Sideways
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Mar ‘10: Corn closed at the exact same price it opened, $4.07 1/2. When this happens it is a signal that warns of a potential reversal of trend and in this case it would mean lower. Volume was nothing to write home about today and we were generally quiet for most of the day with a $.05 trade range. I don't have much to add to my comments from yesterday; I still think the Mar '10 contract needs to get above $4.25 for two consecutive closes before we see any aggressive buying.
The dollar rallied again today as it has been trending higher since Dec 1st 2009. The next level of resistance for the dollar is 77.47 and then 77.92, we are currently trading at 76.92 and our low was 74.175 on November 26th, 2009. Again, keep an eye on this dollar because if it keeps moving higher we should see pressure on the commodities markets. I still think it is too early to call a bottom in the dollar based on a two week rally but so far it's trucking right along. We had two consecutive weekly closes above the prior week's high and the last time this happened was in January of 2009.
We currently have a March '10 $4.20 call option in place for catastrophic upside protection and we are short a March '10 $3.60 put to help offset the cost of the $4.20 call. We will buy the short put back if the market rallies any further so we have unlimited downside in the market again.
Bottom line: I am looking for the market to experience an early low tomorrow.
Mar ‘10 Corn – Support/Resistance for 12-16-09
(R3) Resistance 3: $4.17 1/2
(R2) Resistance 2: $4.12 1/2
(R1) Resistance 1: $4.10
Today’s close: $4.07 1/2
(S1) Support 1: $4.05
(S2) Support 2: $4.02 1/2
(S3) Support 3: $3.97 1/2
MEAL – Jan '10 Electronic
Open – $316.00, High – $320.90, Low – $314.30, Close – $316.80 Up $.60
Thoughts – Long Term (into February '10) – Sideways
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Jan ‘10 meal: Meal failed to have any sustainable major follow through to the upside today other than we made a new high above $319.80 but failed to close up there. The trade action we had today is consistent of the last high we had on Dec 1st, 2009 which made the $319.80 high. $319.80 still remains the line in the sand for another move higher as far as I'm concerned. We will need two consecutive closes above this level to see more aggressive buying come into the market.
The $315.00 sell signal I spoke of yesterday would have been exited today as the market went through what would have been the $317.50 stop order. I had a cycle low projected for yesterday and that projection is still good, however, I'm not sold on the idea of big rally here until the $319.80 area comes out.
Bottom line: I’m looking for the market to experience an early high tomorrow.
Jan ‘10 Meal – Support/Resistance for 12-16-09
(R3) Resistance 3: $330.50
(R2) Resistance 2: $323.90
(R1) Resistance 1: $320.40
Today’s close: $316.80
(S1) Support 1: $313.80
(S2) Support 2: $310.70
(S3) Support 3: $304.10
HOGS – Feb ‘10 GLOBEX
Open – $66.05, High – $67.55, Low – $65.675, Close – $67.425 Up $1.55
Thoughts – Long Term (into February) – Neutral
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Hog margins are starting to show some good profit for the coming year. If you would like to run a profitability crush for your operation, email us at email@example.com.
Feb ‘10 hogs: The Feb '10 contract traded a lot higher today as it rallied during the last hour of trade (exact opposite of what I said I thought it would do based on my comments yesterday). There is no news to speak of that I'm aware of to warrant the jump at the end of the day and is actually surprising based on the noon cutout report showing most cuts quoted lower. We do know that morning reports are just reference points and can't be taken as fact because they usually change by the afternoon.
Today's rally came with good volume in the Feb '10 contract, we still need to get above and close above $68.10 for two consecutive days in order to see more aggressive buying surface in the Feb '10 contract. As I said yesterday I have a lot of indicators that are pointing lower for the short-term but the market seems strong and continues to hold support levels on retracements lower. I will continue to be friendly for now but will be watching closely to see how we trade against $68.10 if we can get there. Again if we can close above $68.10 for two consecutive days then $70.675 should be our next target.
Like I mentioned in the feed section, I'm concerned about the dollar having two good weeks of trade and if it continues it could put the brakes on the hog market and commodities in general for a period of time. If you have good profits make sure you look at protecting them!
Bottom line: I’m looking for an early high tomorrow.
Feb ‘10 Hogs – Support/Resistance for 12-16-09
(R3) Resistance 3: $70.425
(R2) Resistance 2: $68.75
(R1) Resistance 1: $68.10
Today’s close: $67.425
(S1) Support 1: $66.875
(S2) Support 2: $65.00
(S3) Support 3: $63.125
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