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CORN – Dec ‘09 Electronic
Open – $3.80 1/4, High – $3.96 1/2, Low – $3.75 1/4, Close – $3.90 Up $.07 3/4
Thoughts – Long Term (into December ‘09) – Sideway/Lower
Dec ‘09: Oh how things can change, yesterday's end of day rally was fueled by fund buying. The problem with fund buying is there are no fundamental reasons for major buying other than the index funds need to move money into commodities for inflationary hedging purposes. They are big enough so it really doesn't matter in the grand scheme of things if the market closes $.10 against them; they are here for the long-term.
The Dec '09 looks like it wants to challenge the $4.13 1/2 high we had a couple of Friday's ago. The fundamentals aren't necessarily the driver in this market so it is hard to tell when the steam will run out of the locomotive that is the funds. The technical picture looks good as of now and the market is rallying through a period where my cycle indicator says we should be moving lower. Things indicators and fundamentals don't seem to work in justifying price when money is moving for reasons other than what the market is typically used to.
We still have our upside needs covered via a $3.70 synthetic call option and will remain in this position until the market states otherwise. If you have no coverage I would suggest you talk with your broker and buy some out of the money calls for catastrophic protection if this thing really gets moving. If $4.13 1/2 is breached and we close above it for two consecutive days the markets next target is the summer high of $4.73 1/2.
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 11-04-09
(R3) Resistance 3: $4.20
(R2) Resistance 2: $4.08 1/2
(R1) Resistance 1: $3.99 1/4
Today’s close: $3.90
(S1) Support 1: $3.87 1/4
(S2) Support 2: $3.78
(S3) Support 3: $3.66
MEAL – Dec ‘09 Electronic
Open – $302.50, High – $312.50, Low – $300.10, Close – $306.40 Up $3.70
Thoughts – Long Term (into November ‘09) – Sideways/Lower
Dec ‘09 meal: Meal has also been a benefactor of the influx of fund buying and popped this market higher as well. We exited our long positions last week around $294.00 but we were stopped back into the market at $297.00 on Friday and continue to be long the market as we need price protection on meal if it moves higher. If the Dec '09 meal contract is going to continue to move higher it will need to close above $311.40 for two consecutive days.
We made a new high above $311.40 today but failed to hold the higher prices as the market drifted into the close unlike yesterday when we rallied. We will continue to hold our long meal positions because we need the coverage and things are moving based on outside forces instead of the directly related news as it pertains to the Ag sector. Weather is still an issue for prices but we can make good harvest progress with a few days of dry weather.
The weather forecast brought some more small yet burdensome rains in for next week across the entire Corn Belt which again could keep producers out of the fields and away from the harvest finish line. Intra-day charts suggest we see more follow through buying tomorrow but, in my opinion, it is up to the funds and what they decide to do our a much wetter forecast.
Bottom line: I’m looking for the market to experience an early low tomorrow.
Dec ‘09 Meal – Support/Resistance for 11-04-09
(R3) Resistance 3: $326.60
(R2) Resistance 2: $318.70
(R1) Resistance 1: $312.60
Today’s close: $306.40
(S1) Support 1: $300.20
(S2) Support 2: $293.90
(S3) Support 3: $286.40
HOGS – Dec ‘09 GLOBEX
Open – $57.65, High – $58.275, Low – $57.15, Close – $57.55 Down $.175
Thoughts – Long Term (into December) – Neutral
Dec ‘09 hogs: The hog industry was dealt another wild card yesterday afternoon when the USDA confirmed hogs in a commercial hog farm in Indiana tested positive for 2009 H1N1. The news report states that the hogs have recovered as well as the producer. You can read the article from Reuters here. The market didn't seem to get too worked up about this news story as we were down early and found support that started the firm tone that held for most of the session.
The market action today showed us a sign of balance which means the trade seems to be okay with where the price is as of today. We took out yesterday's high but failed to find buy stops above the market, there were good sized sell orders entering the market around $58.30. We entered back into some of our short futures positions against our long $52.00 call which gives us a synthetic put. I am not trusting of the market with news coming out about H1N1 in a commercial herd and as I've mentioned before I'm sure there will be more surfacing as time passes.
The fund buying that has been taking place makes it hard to manage risk in the market place because you need the downside of the market covered yet the index funds can push prices much higher and most hog operations need the higher prices if they can get them. We entered back into our hedges because we need to make sure the downside of this market is covered and with the call options in place we have the upside open so there is no reason for us to risk this type of news pushing the market lower. As mentioned before this news hasn't affected the market thus far but we will see how things go in the coming days.
Bottom line: I’m looking for an early low tomorrow.
Dec ‘09 Hogs – Support/Resistance for 11-04-09
(R3) Resistance 3: $59.975
(R2) Resistance 2: $58.85
(R1) Resistance 1: $58.325
Today’s close: $57.55
(S1) Support 1: $57.20
(S2) Support 2: $56.60
(S3) Support 3: $55.475
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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Hurley & Associates believes positions are unique to each person’s risk bearing ability; marketing strategy; and crop conditions, therefore we give no blanket recommendations. The risk of loss in trading commodities can be substantial, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. NFA Rules require us to advise you that past performance is not indicative of future results, and there is no guarantee that your trading experience will be similar to the past performance.