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CCI Violates Uptrending Support

00:00AM Oct 03, 2008

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

CCI violates support... Yesterday, the Continuous Commodity Index (CCI) posted its first close below the 450.00-point level since November 2007 and violated uptrending support drawn off 2005 and 2007 reaction lows. This is not a positive sign, as it signals the potential for more commodity selling.

Outside markets were largely behind Thursday's losses. The dollar was sharply higher -- moving above the September high -- while crude oil and gold were sharply lower. This, as well as economic uncertainty, resulted in a bearish environment in the grain and livestock markets and spurred widespread commodity liquidation

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Opening calls. These calls originate more than three hours before the open -- use caution, things change::

Corn: 1 to 3 cents higher. Futures saw light short-covering overnight. Futures closed 27 1/2 cents lower to their 30-cent limit lower on sharp pressure from widespread commodity liquidation. Daily trading limits are expanded to 45 cents today. March corn futures gapped lower on the open and closed limit lower to violate support and post a fresh yearly low. Next support lies at the November 2007 high of $4.41 1/2. To the upside, resistance lies within today's gap area between $4.97 and $5.02 1/2.

Soybeans: 3 to 5 cents lower. Futures were weaker overnight despite light gains in the crude oil market. Futures gapped lower on yesterday's open and sharply extended losses to finish 49 to 51 1/4 cents lower. Futures were pressured by outside markets. January soybeans gapped to a fresh weekly low and extended losses. Next support lies at the December low of $10.08.

Wheat: Mixed. Futures were 2 cents lower to 2 cents higher overnight. Chicago wheat closed 31 1/2 to 35 1/2 cents lower yesterday on sharp spillover from outside markets. Traders are growing increasingly concerned about the rising dollar, which means increased competition for our share of exports. December Chicago wheat gapped lower on the open and sharply extended losses to penetrate support at September 4, 2007, high of $6.40.

Cash cattle expectations: $2 to $3 lower. Cash cattle trade turned active at $96 to $97 prices Thursday -- $2 to $3 lower than the bulk of last week's trade. Feedlots moved cattle at lower prices after cattle futures dropped sharply Thursday morning. Cash sources say there are some light cleanup sales left today, although those supplies could be carried into next week.

Futures call: Weaker. I'm more inclined to call cattle weaker based on spillover pressure. But October futures moved to a discount to cash trade yesterday. December live cattle gapped lower on yesterday's open and violated support at the November 2007 low of $97.55, but closed above that support. Contract-low support lies at $96.90. If traders view this week's losses as overdone, some short-covering support may surface to finish the week.

Cash hog expectations: Steady to weaker. Pork cutting margins turned negative Thursday, but thanks to lower cash hog bids and a modest 29 cent rise in pork cutout value yesterday, are back just above breakeven. While packers are estimated to be making a little money on each hog killed, there's no incentive to increase cash hog bids are market-ready supplies are hefty.

Futures call: Mixed. Heck, I don't know if we should be calling lean hog futures higher on short-covering or weaker on spillover pressure. But their ability to move off session lows yesterday signals the potential for short-covering this morning. But it's not arguable the attitude is bearish in the hog market.