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CORN – Dec ‘09 Electronic
Open – $3.59, High – $3.70, Low – $3.58 3/4, Close – $3.64 Up $.04 1/4
Thoughts – Long Term (into December ‘09) – Sideways
Dec ‘09: Today's action left me wondering about the strength in corn. We matched the $3.70 high from Tuesday which sets up a sell signal for tomorrow. If the Dec '09 contract touches $3.72 then there is a sell signal generated for $3.69 1/2 STOP with a protective risk management buy stop $.02 above the most recent intra-day high. We exited our long delta hedges against our $3.20 Nov / $3.60 Dec call spread today and entered into a short-term position of a $3.70 Nov / $4.00 Dec call position for $.04 1/2 just to get through tomorrow's report. If the report is negative we will exit our new position next week as I normally do not make trade/position decisions on event days as they are littered with emotion and at times irrational trade.
I am beginning to thing we may be reaching a short-term top in the Dec '09 contract for now UNLESS we can close above $3.76 for two consecutive days then I will adjust my opinion. For now we want to manage equity as best we can and not take any un-necessary risks.
Bottom line: I am looking for the market to experience an early high tomorrow but the USDA report should prevail and provide direction.
Dec ‘09 Corn – Support/Resistance for 10-09-09
(R3) Resistance 3: $3.86 3/4
(R2) Resistance 2: $3.75 1/2
(R1) Resistance 1: $3.69 3/4
Today’s close: $3.64
(S1) Support 1: $3.58 1/2
(S2) Support 2: $3.53
(S3) Support 3: $3.41 3/4
MEAL – Dec ‘09 Electronic
Open – $279.80, High – $291.90, Low – $279.80, Close – $289.70 Up $8.70
Thoughts – Long Term (into November ‘09) – Sideways/Higher
Dec ‘09 meal: We broke through the $285.50 and $287.90 resistance levels in the Dec '09 contract and closed at $289.70 for the day. We exited our long futures around $287.00 today and entered into a $290 Nov / $320 Dec call spread for $4.00 because we have a USDA report out tomorrow that has the possibility of moving the market significantly therefore I wanted to know our risk in this position. Once we know what the report is and how the market reacts we will probably move back into a more aggressive position but for now we want to minimize our risk and protect equity.
I am still friendly the soybean meal market because of the seasonal aspect as well as some longer-term cycles.
Bottom line: I’m looking for the market to experience an early high and late low tomorrow but the USDA report should prevail and provide direction.
Dec ‘09 Meal – Support/Resistance for 10-09-09
(R3) Resistance 3: $311.30
(R2) Resistance 2: $299.20
(R1) Resistance 1: $294.50
Today’s close: $289.70
(S1) Support 1: $282.40
(S2) Support 2: $275.00
(S3) Support 3: $269.70
HOGS – Dec ‘09 GLOBEX
Open – $51.675, High – $53.925, Low – $51.35, Close – $53.525 Up $1.775
Thoughts – Long Term (into December) – Negative
Dec ‘09 hogs: My thoughts for today haven't changed much from yesterday. The key level of resistance that I spoke of is $53.10 and we broke through that today and closed above it but I would like to see it close above this level again tomorrow before we look for much higher prices. I have looked and looked spoken with many people whose opinions I respect and there is next to no fundamental backing to this rally at all! This means if you haven't hedged hogs that need to be hedged I would still be looking to use a limited risk strategy to do so.
When the fund buying halts; the move lower could be swift due to the lack of fundamental support. This move is more about managed money and inflation hedging than anything else, and of course this is my opinion. We still have another fund looking to move money into lean hogs over the next couple of weeks so it will be interesting to see what takes place in the coming days with speculators and commodity funds. The U.S. Dollar Index made a new low for 2009 today and this is going to continue to move money into tangible assets like commodities as a hedge against inflation.
The current price structure of the market is tricky because I believe we are too high for what the fundamentals suggest we should be but the market is moving in a technical fashion and with the Dec '09 contract closing above $53.10 it could bring more buying into the mix. The question remains when will the buying stop and the bottom fall out of the market, my answer is who knows?
Bottom line: I’m looking for the market to make an early high tomorrow and weaken as the day progresses. As I said yesterday this can be thwarted by fund buying which is what happened today. My cycle tells we should peak early and then soften as the day moves forward however the way this market has been trading I am not holding my breath.
Dec ‘09 Hogs – Support/Resistance for 10-09-09
(R3) Resistance 3: $56.525
(R2) Resistance 2: $55.45
(R1) Resistance 1: $54.45
Today’s close: $53.525
(S1) Support 1: $52.90
(S2) Support 2: $51.90
(S3) Support 3: $50.525
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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