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CORN – Sep '09 Electronic
Open – $3.18 3/4, High – $3.34 1/2, Low – $3.17 1/4, Close – $3.24 1/4 Up $.03 1/4
Thoughts – Long Term (into September '09) – Sideways/Higher
Thursday I said: "It didn't feel that great yesterday when it neutralized our feed corn positions and the market rallied into the close, today I was glad to be neutral. The weather still looks good for corn development even if it gets warm because it has been such a cool summer with ample moisture that we can use the heat. We closed well below the $3.40 number I spoke of yesterday and now the next downside target is $3.27 1/2 and then $3.15 1/4.
I want to stay on the sidelines for now until the market gives me something to hang on to. The close today was pitiful at best and would suggest a sideways to higher open tonight with just primes the pump for another push lower after some people take a stab at buying it and also some minor short covering. Once this business is out of the way the selling can begin again at this point. The USDA needs to reduce acres and keep yields in check on the Aug 12th report and/or have a forecast for an early frost before this market can have a sustainable rally.
I think the Informa number of final corn yield at 164 bu per acre scared a lot of bulls yesterday, myself included.”
Sep '09: To my surprise Sep '09 corn mounted more of a rally today than I thought was possible but it failed to hold going into the close of the day session. The weather remains favorable for corn growth but again the wild card is the USDA crop report due out at 7:30 a.m. CST this Wednesday the 12th. As I have said for the last couple of weeks now, I believe the corn market warrants some call coverage going into this report if you don't have any feed needs covered.
The number on Wednesday morning should give the market further direction from here because if the acres stay relatively the same we will probably experience a sell off due to what has been labeled as good growing weather for corn. If acres drop and yield isn't raised too much then we could see the market stabilize in this area and hold some premium in the event we were to get an early frost or at least some talk of one.
At this point I wouldn't want to be uncovered with feed needs nor would I want to be completely covered (via cash or straight futures) at this point. I think you need some wiggle room going into this report because the USDA seemingly likes to surprise us.
Bottom line: I am looking for the market to experience an early low tomorrow.
Sept '09 Corn – Support/Resistance for 08-11-09
(R3) Resistance 3: $3.39 3/4
(R2) Resistance 2: $3.34 1/2
(R1) Resistance 1: $3.25 3/4
Today’s close: $3.24 1/4
(S1) Support 1: $3.23 1/2
(S2) Support 2: $3.20 1/2
(S3) Support 3: $3.17 1/4
MEAL – Sep '09 Electronic
Open – $340.60, High – $345.90, Low – $334.00, Close – $334.20 Down $10.00
Thoughts – Long Term (into September '09) – Sideways/Higher
Thursday I said: "The market made a low early in today and moved higher from there the balance of the day which is the exact opposite of what I was looking for. We are still neutral meal at this point and will monitor the market closely to look for signs of direction, right now those signs point to be cautious if you're long. The soybean market is having a tough time breaking as it makes a new low during the session and then it is bought back going into the end of the trading day, same applies for meal.
I am looking for meal to open mixed to higher tonight like corn and probably soybeans too and then meet resistance early. The market continues for the fourth session to respect the $338.30 support level on the close. If we close at this level or lower tomorrow I will not be overly friendly to the meal market at all because the weekly chart will look like it failed to secure higher prices. If this type of close does happen I would expect sell stops below this week's low of $332.00. We still need to see the market close before we can make this assessment.”
Sep '09 meal: Sep meal struggled today as a result of the sell-off in soybeans. The general thought among traders today is the corn acres will be reduced on Wednesday and as a result the soybean acres will be increased. I still take the stance of I have no clue what the USDA will provide us with Wednesday morning but we are still delta hedged (neutral) on soybean meal at this time.
The market looks like it is pausing in this area and is looking for good reason to either move higher or lower. When doing this the market trades sideways as traders develop opinions of the market and then whichever direction the market breaks out of the traders that were wrong will more than likely cover their losing positions creating volatility. The sideways range we have developed is between $332.00 and $349.20 so which ever direction we break out of should provide a push or volatility.
Bottom line: I’m looking for the market to experience an early low and a late high tomorrow.
Sep '09 Meal – Support/Resistance for 08-11-09
(R3) Resistance 3: $341.70
(R2) Resistance 2: $339.50
(R1) Resistance 1: $337.40
Today’s close: $334.00
(S1) Support 1: $332.50
(S2) Support 2: $330.60
(S3) Support 3: $329.00
HOGS – Oct '09 GLOBEX
Open – $45.00, High – $46.075, Low – $44.725, Close – $45.00 Up $.10
Thoughts – Long Term (into December) – Negative
Thursday I said: "If you will notice my support levels now go five deep instead of three because I wanted to point out how little support there is below this market. The support is there it is just far away is all. If we close below $47.40 especially for the week I would say watch out for next week because we should move lower hard and fast. In my estimation the $2.23 lower cutout tonight probably put the nail in the coffin because in all reality who wants to step in front of this market and buy it.
The path of least resistance is lower, people are also scared so if they haven't already hedged they are more than likely faced with the decision do I exit the business or cut my losses? Emotions are in high gear if production is not sold yet and that can skew a market just like the funds can, however, I don't know how skewed this market is. Packers have little to no interest in buying hogs aggressively if at all. If we get liquidation ramped up and going full bore we should see additional pressure on the front month futures until everything runs its course.
I hate to say it but if cutout doesn't turn around fast, demand come to the market or the cash market pick up I believe we could see October '09 futures test the $39.64 area. The technical side of the market has very little support below today's market close. We have hedges in place and are now looking to buy out of the money call options to protect the equity that we have in our positions as well as provide upside in the market if and when this thing ever decides to turn higher. Don't look any further into buying calls than risk management; we are doing this because it makes our risk known.
I don't want to speak the market into moving tomorrow but I wouldn't be surprised to see another limit lower move in the Oct '09 contract tomorrow (that would put us at $44.57). We are limit lower in the Globex extended hour trade tonight (this is just continuation of the pit session today) with small pool orders offered limit lower."
Oct '09 hogs: Oct '09 hogs tried to rally today, perhaps with the notion that pork cutout was going to be higher tonight as it was up $2.08. I am sure there were traders that new of the higher cutout number prior to it happening and we saw the market trade higher for most of the day but fail to hold any good gains going into the close. After the cutout number was released at 3:00 p.m. CST the Oct '09 contract popped $.50 to $.80 on the news but failed to do much more than that.
It is possible to see the market retrace to upwards of $49.325 if we can get more upside follow through on the pork cutout; however, it sounds as if we are getting more liquidation in the industry which could help keep a lid on the cash market for now. From a technical perspective the market opened above last week's low which is a perfect open for follow through to the downside. From the July 17th high to the last reaction low was a move of $9.10 cwt and the most recent move from the high on July 31st to Friday's low has $7.85 cwt. I do see a cycle low projection for the Oct '09 contract on Aug 12th but as of right now I don't see anything in the candlestick charts that would agree with the cycle at this time. I will continue to monitor this cycle to see how it develops along with any other signals the charts may provide.
I would like to see the pork cutout continue to move higher ALONG with cash in conjunction with the SHORT-TERM projected cycle low on Aug 12th in the Oct '09 contract.
Bottom line: I’m looking for the market to make an early low tomorrow and strengthen as the day progresses.
Oct '09 Hogs – Support/Resistance for 08-11-09
(R3) Resistance 3: $46.55
(R2) Resistance 2: $46.075
(R1) Resistance 1: $45.80
Today’s close: $45.00
(S1) Support 1: $44.625
(S2) Support 2: $43.80
(S3) Support 3: $39.64
(S4) Support 4: $35.27
(S5) Support 5: $29.40
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