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CORN – Dec ‘09 Electronic
Open – $3.26 1/2, High – $3.30 3/4, Low – $3.20 3/4, Close – $3.29 1/4 Up $.03
Thoughts – Long Term (into December ‘09) – Sideways/Lower
Tuesday I said: "Only one of the two sell signals I talked about yesterday were actually good. The second signal I talked about was the one that sent the market lower today as we made a new high above $3.35 1/2 and then proceeded to move lower from there. Once we made a new high above $3.35 1/2 the sell signal was generated at $3.35 STOP with a risk management buy stop at $3.39 1/2 stop. We are still neutral the corn market at this time and will look for reasons to be otherwise long the market but for now there isn't much out there other than the potential for a frost. If the sell signal that was generated today is text book we should see another move lower tomorrow and possibly test the contract low of $3.11 1/2 in the near future. I don't have a good feeling about corn and if we make a new contract low and close below it I am looking for corn to reach the $2.60ish area basis the Dec '09 corn contract."
Dec ‘09: Corn is having a tough time making up its mind on direction the last two days. My opinion remains the same, as each day passes without the major threat of an early frost the farther this corn market has to fall. I am expecting another move toward the contract low of $3.11 1/2 in the near future but the market has been a tough one to break. Today's action shows me there is confusion and a relatively good balance in price for the time being.
We have developed a range of $3.45 to $3.11 1/2 and whichever direction it breaks out of the market will surely move in that direction for a couple of session (my opinion). We still have upside coverage in place and as a risk management move today we exited some short $3.90 call options for $.05 that we originally sold for $.14 1/2 as a part of an option strategy. By doing this it opens our upside wide open if the market rallies big which I don't expect. Now that I say I don't expect a rally you might ask why I bought those $3.90 puts back. Experience has taught me not be greedy because the market has a paddle big enough to spank anyone!
I am not bullish corn at this point, if the market moves higher I believe it is on the coattails of an early frost forecast which is usually more hype than harm. I don't believe higher prices are sustainable for any great length of time until something changes fundamentally. Our wild card risk is the USDA throwing its signature pitch, a curve ball and significantly changing the numbers on our balance sheet. If you need ownership of corn I suggest you do it with a known risk option strategy but more importantly talk to your broker about what is right for you and your operation. If you don't have a broker and would like to visit about a position give us a call at 1-877-212-2564.
Bottom line: I am looking for the market to experience an early high low and firm as the day progresses but I am not expecting any major move up.
Dec ‘09 Corn – Support/Resistance for 08-28-09
(R3) Resistance 3: $3.37 1/2
(R2) Resistance 2: $3.31 1/2
(R1) Resistance 1: $3.30 3/4
Today’s close: $3.29 1/4
(S1) Support 1: $3.28 1/4
(S2) Support 2: $3.25 3/4
(S3) Support 3: $3.20 3/4
MEAL – Oct ‘09 Electronic
Open – $308.40, High – $311.50, Low – $307.10, Close – $308.50 Down $.10
Thoughts – Long Term (into November ‘09) – Sideways/Lower
Tuesday I said: "It looked like another day off to the races early in the session but the market failed to hold its gains. The high in soybean meal did come early today as thought and made for kind of an ugly close. I am not overly excited about getting aggressively long but on a break in price I will be actively looking to retain ownership of an option strategy because of the wedge formation that is building in the weekly chart.
The wedge pattern suggests a big move in one direction or the other is coming so we need to make sure we are prepared for this potential move if it happens.I am looking for meal to find continued weakness tomorrow and support should be strong around $303.60 but if we get below that we could see some sell stops trigger and propel the market lower. If you need coverage for meal look at using a known risk strategy to give you upside potential."
Oct ‘09 meal: The Oct '09 contract is still taking a break from the upside and similar to corn if the weather continues to be okay without any major threat of an early frost I think the Oct '09 contract is due for a correction back to the $294.30 to $298.20 area to try and find some support. I still want ownership of meal through a known risk strategy but for now we remain on the sidelines in this market with no positions in place. I will continue to monitor this chart closely and if we can get a move lower we will put some coverage in place or if the market closes above $325.00 for two consecutive days then we will look to add coverage but until then we are on the sidelines.
As I mentioned yesterday there is still the wedge forming in the weekly chart which would suggest a breakout move is pending but we don't know to which direction and only time will tell.
Bottom line: I’m looking for the market to experience an early high and late low tomorrow.
Oct ‘09 Meal – Support/Resistance for 08-28-09
(R3) Resistance 3: $315.10
(R2) Resistance 2: $312.90
(R1) Resistance 1: $308.30
Today’s close: $308.50
(S1) Support 1: $303.10
(S2) Support 2: $301.60
(S3) Support 3: $300.00
HOGS – Oct ‘09 GLOBEX
Open – $47.20, High – $48.80, Low – $46.825, Close – $47.90 Up $.85
Thoughts – Long Term (into December) – Negative
Tuesday I said: "I am surprised to see the market move as high as it did today with the cash news still coming in within a range and no shortage fears on the end of the packers. The market rallied early today and held firm once the noon cutout report stated that hams were sharply higher at $5.00 higher and ultimately came in $7.11 higher at the end of the day. The higher hams allowed the pork cutout to be $2.51 higher on the day, however, the market was anticipating this today so be careful tomorrow.Once the pork cutout number was released this afternoon the market popped higher but then we saw some offers come into the market selling it. I am not going to read that much into it but it is interesting to see how this seems to happen. The Oct '09 contract has now setup for another sell signal tomorrow if the market moves above $48.85 and then a sell signal will be generated for $48.75 STOP with risk management buy stop $.50-$.75 above the most current high. It is my belief that the cutout number was mostly factored into today's trade.
It seems to me that if there is a need to hedge, now may be a good time to look at a limited risk strategy because I believe the Oct '09 contract is looking for a top in this area and setting up for another move lower in the near future."
Oct ‘09 hogs: Oct '09 hogs continue to shower us with negative setups and sell signals but the market remains firm and unwilling to break from these levels. We moved all of our short October hedges into the December today as my research shows December is a better sell and hold month than October is after September 2nd. In my experience the October/December spread is one of the most violent when it comes to movement near the leading month's expiration. You either partake in the spread invert (typically invert that is) or you miss it by a mile so it seems.
I remain negative on Oct '09 hogs until we have two consecutive closes above $49.00. The cash market was slightly firmer throughout the day today but nothing significant and the noon cutout report gave us nothing to hang our hat on either as it suggested steady trade. October has give me the following signals this week, Monday - sell signal at $48.00, Tuesday - issued a warning signal of a possible reversal, Wednesday - sell signal at $48.75, today there was another bearish formation that gives no signal other than caution if you are long. So, I look at this and say bearish but why are we continuing to remain firm? I don't know.
Cutout was up $2.52 today on 48 loads so volume wasn't spectacular it looks more par for the course than anything. The hourly charts suggest the market to firm as the day progresses tomorrow in the Oct '09 contract with major resistance at $49.00. Ham's and Ribs are the cuts that have rallied the most in the past two weeks and hams alone have rallied $23.86 since Aug 12th, 2009. Some of the recent gains in product may be attributed to the upcoming Labor Day holiday. If we can continue this pace and incorporate other cuts into the mix after Labor Day then we may have something to get excited about but until then keep our rain coats on; it's stopped pouring but it sure as heck is still raining.
Bottom line: I’m looking for the market to make an early low tomorrow.
Oct ‘09 Hogs – Support/Resistance for 08-28-09
(R3) Resistance 3: $49.86
(R2) Resistance 2: $49.00
(R1) Resistance 1: $48.85
Today’s close: $47.90
(S1) Support 1: $47.50
(S2) Support 2: $46.675
(S3) Support 3: $46.00
(S4) Support 4: $39.64
(S5) Support 5: $35.275
(S6) Support 5: $29.40
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