CORN - July ‘09 Electronic
Open - $4.34 1/4, High - $4.45 3/4, Low - $4.34 1/4, Close - $4.45 3/4 Up $.09 1/2.
Thoughts - Long Term (Into September ‘09) - Bullish/Higher
May 18th I said: “The market took a nose dive on Friday compared to what we had been used to earlier in the week. Most of the sell off was due to profit taking going into the weekend and I we had some of that follow through last night as well. Most of the negativity was over within the first hour of trade in the day session today. I still have the June ‘09 $3.80 call options in place for feed needs and on Friday I purchased a $4.30 June ‘09 put and sold a $4.70 July ‘09 call option for 1/2 cent to lock in the $.50 difference between our $3.80 and $4.30 strike price options which was executed just in time right before the market dropped. I honestly didn’t expect that big of a decline on Friday but I wasn’t going to rule out a decline in today’s trade. I actually exited the position this morning at $.11 credit to give our position the upside potential again. I executed this trade within 20 minutes of the market open today and have been participating in the upward movement in July ‘09 futures.
The reason I bring the previous paragraph up is to let you know I was wrong on what I “thought” the market and the risk management principles that I exercised saved equity in our position. My point is to always try and do what is right and don’t get caught up in what you “think” will happen. No keep in mind it doesn’t always work this way because sometimes the market does do what you think but if you position yourself so it is win/win you will be a lot less stressed and live to be in business another day.
The trade action from today was quite friendly from the perspective because Sunday night’s open was a gap .02 3/4 lower than Friday’s low which usually means the market is getting too anxious about a move in the direction of the gap and then reverses. These types of gaps are usually at the top or bottom of a longer market move but for now it was at the bottom of this intermediate market move. This looks very friendly to me I am going to stick with the thought of a testing the $4.49 area to see if we can break through this level or not.”
July ‘09 corn: As noted above I have been looking for a test of $4.49 basis the July '09 futures and I think today was close enough therefore I exited the long futures I had on as a result of the $3.80 June '09 calls that were exercised into long positions in May. I had orders to exit at $4.48 but changed my mind and exited at approximately $4.41 for now with a buy stop at $4.53 if I am wrong. I am still bullish this market assuming the U.S. Dollar index continues its decline but at the first sign of slowing momentum I will be looking to protect any equity that I can in positions whether it is feed or crop production.
As of the market close I do have a sell signal for tonight on the hourly chart, it is a sell stop at $4.44 1/4 with a protective risk management buy stop .01 above the most current high or above $4.50. I also have a sell signal forming on the daily chart IF and only IF the market opens higher tonight. If the July '09 futures open above $4.45 3/4 then there is a sell signal generated at $4.45 1/4 STOP with a protective risk management stop above $4.50 which is near longer-term resistance. I think the market has done enough to the upside for the moment (Tuesday and maybe Wednesday) before we make a solid run at $4.49 1/4 and trying to close the market above this level.
Bottom line: I am looking for the market to experience an early high and a late low tomorrow. I am expecting the one sell signal in the hourly chart to prove good tonight and the potential of the second sell signal on the daily chart to further a case to be out of long positions for the next day or two. Again, I will continue to monitor the $4.50 price level and if we close the market above that level for two consecutive days then I will adjust my position again but for now I will try and buy July '09 corn around $4.30 to re-enter the long positions I exited today.
July ‘09 Corn - Support/Resistance for 06-02-09
(R3) Resistance 3: $4.52
(R2) Resistance 2: $4.49 1/4
(R1) Resistance 1: $4.45 3/4
Today’s close: $4.45 3/4
(S1) Support 1: $4.42 3/4
(S2) Support 2: $4.40
(S3) Support 3: $4.36
MEAL - July ‘09 Electronic
Open - $381.80, High - $393.90, Low - $381.80, Close - $390.80 Up $8.30
Thoughts - Long Term (Into September ‘09) - Bullish/Higher
May 18th I said: “I am still out of the meal market from an aggressive position perspective but we do have some bullish put spreads in place to give us some upside coverage while we assess the market. The cycle projector that I speak of frequently calls for a high on May 20th which has changed from what I have previously mentioned. It like most any analysis tool is calculated based on history and as we move forward history changes therefore changing my indicator. It isn’t much of a change but it is different from early last week’s version. I am looking for more follow through to the upside tomorrow as I look for grains to be higher across the board. If the July ‘09 futures open higher than $366.70 then that would produce a sell signal at $366.20 on a sell stop with a protective risk management buy stop above the most current high at the time of the fill for the sell stop.”
July ‘09 meal: I purchased a three way position in Aug '09 meal on May 19th which consists of the following: long an Aug '09 $360 call, short an Aug '09 $400 call and short an Aug '09 $320 put for a total premium of $3.50/ton which coverage until around the third week of July '09. I did this because I wanted flexibility in my position which this one provides. The position puts us long at $363.50 in the Aug '09 contract until we reach $400.00 and then we are also open to the downside until we reach $323.50 in the Aug '09 contract.
The July '09 meal contract has provided a longer-term sell signal on the weekly charts at $392.00 (which would have been hit today) with a risk management buy stop at $395.00 in the July '09 futures. This is a weekly chart therefore the buying and selling using stops could whipsaw you into pieces because for the this week and next week the sell stop signal will still be there sell signal at $392.00 no matter how many times your risk management buy stop gets triggered. This is the type of signal that I like to use options for because it gives you the time you need to let the signal/trade work.
Bottom line: I’m looking for the market to experience an early high and a late low tomorrow.
May ‘09 Meal - Support/Resistance for 06-02-09
(R3) Resistance 3: $393.90
(R2) Resistance 2: $392.20
(R1) Resistance 1: $391.70
Today’s close: $390.80
(S1) Support 1: $389.40
(S2) Support 2: $386.50
(S3) Support 3: $385.20
HOGS - June ‘09 GLOBEX
Open - $63.70, High - $64.30, Low - $62.60, Close - $62.75 Down $1.175
Thoughts - Long Term (Into August) - Friendly
May 18th I said: “The June ‘09 contract sold off early today but managed to find support around the 62% retracement level from the most recent high back to the contract low. The June ‘09 contract had a good close as it held the 50% retracement level of $66.425 by settling at $66.775. The cutout number was down tonight but my thought is most of this has been factored in from last week when the trade was skeptical of cutout but it hung in there for the most part. The “weak” cutout that was talked about is now surfacing and I believe may have reverse affect on the market by moving it higher versus what logic says when negative news comes out.
I am of the opinion that today was a good day technically as we moved below the 50% retracement level, tested the 62% level and then popped back up and settled above the 50% retracement level of support, $66.425. I had a cycle low in the hourly chart today and I have the market trading higher tomorrow with a probable challenge to today’s high of $67.275 and beyond if we hit buy stops. There was also talk of Russia being back in the market for pork which is really what got the market moving higher again today.”
June ‘09 hogs: The June ‘09 contract has been much weaker than I anticipated over the last couple of weeks. I thought we could test the old contract low of $63.40 which we did on Friday the 29th ($63.50) and hold but that wasn't the case today. We moved through the $63.40 support level with relative ease as the market is still fearful of weaker product demand and as the market usually knows what the cutout will be prior to it happening called today's trade action properly as the cutout was down $1.34 today while cash was near steady per the USDA afternoon report.
If we do not close above $63.40 tomorrow then I would expect to see another leg lower in the June '09 contract unless we get the cash market to turn around in the very near future. The U.S. Dollar has been in a rapid decline and has a projected technical objective of 77.68 which isn't all that far away. If the dollar breaks this level of support then the next level will be the low of Dec '08 of 70.69. The export market should begin seeing some benefit of the weaker dollar index and it was reflected in the deferred months today with the Dec '09 contract up $1.375 for the day.
I do not have any hedges in place at this time as I wait for the weakness in the dollar index to take hold and move some pork however I am nearly out of patience. Most commodities markets in general have been a benefactor of "outside" money with the exception of lean hogs but the one positive I do see is that the funds are near a record short position and when they change their opinion of the hog market they have a lot of contracts to cover (buy).
Bottom line: I’m looking for the market to make an early low and a late high in tomorrow’s trade.
June ‘09 Hogs - Support/Resistance for 06-02-09
(R3) Resistance 3: $64.34
(R2) Resistance 2: $63.875
(R1) Resistance 1: $63.40
Today’s close: $62.75
(S1) Support 1: $62.15
(S2) Support 2: $61.90
(S3) Support 3: New Lows
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