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CORN – Dec ‘09 Electronic
Open – $3.07, High – $3.12, Low – $3.04 3/4, Close – $3.09 3/4 Up $.02 1/4
Thoughts – Long Term (into December ‘09) – Sideways/Lower
Yesterday I said: “Dec ’09 showed some life early in the trade session only to be met with resistance. Since 1989 December corn has moved higher 6 years and lower 15 years from the Sep 1 to Sep 15. The average up move is $.06 3/4 and the average down move is $.10 1/4 with the maximum move higher during this time frame being $.09 1/2 and the maximum move lower being $.24 1/4. The December ’09 contract was $.13 lower on Friday’s close compared to the close on Sep 1. 2004 was the year with the maximum down move of $.24 1/4 and from Sep 1 to Oct 1 that year the Dec contract fell $.36 3/4.
Seasonal tendencies under normal circumstances give us a general idea of what could happen. I am of the opinion that this year is similar to 2004 with the crop potential and price pattern etc. If we don’t see an early freeze somewhere to take away some of the crop that is out there we need not look for much of a rally in the corn market. I can’t say we will not rally at some point but we could see a steady decline into the first part of December. If we have wide spread early freeze then all bets are off and we need to assess the situation at that time but for now I think we grind lower.
Friday had a buy signal at $3.12 1/2 stop in the Dec but it was never touched so the trade was never taken. At this point I’m looking for the Dec ’09 corn to make a move toward the $2.90 area and then from there $2.75. I really don’t have much good to say about corn right now.”
Dec ‘09: I don’t have much to add to yesterday’s comments other than my opinion hasn’t changed. I am not a big fan of corn prices if the assumption of a larger crop is accurate. There was a firm that released a report today saying both corn and soybeans yields are overstated but we will let time determine that. I have been surprised almost every year at what the corn crop can withstand in the way of Mother Nature. Granted a freeze could be an extreme issue for corn to deal.
I continue to be open to the downside and have coverage to the upside at this point and will remain that way until we see something to change that opinion. The USDA will release their monthly crop production report on Friday September 11th which should give the market some additional direction.
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 09-10-09
(R3) Resistance 3: $3.23 1/4
(R2) Resistance 2: $3.16
(R1) Resistance 1: $3.12 3/4
Today’s close: $3.09 3/4
(S1) Support 1: $3.05 3/4
(S2) Support 2: $3.01 1/2
(S3) Support 3: $2.94 1/4
MEAL – Oct ‘09 Electronic
Open – $290.90, High – $293.30, Low – $287.10, Close – $290.80 Up $.50
Thoughts – Long Term (into November ‘09) – Sideways/Lower
Yesterday I said: “The Oct contract did close below $297.00 on Wednesday of last week and I said if that was the case I would be looking for $281.50 to be tested. We hit $284.00 as a low today which also ended up being an up-trend line for the contract. As of this point I don’t have any reason to believe we will not test $281.50, however, $284.00 could be viewed as close enough. I don’t have any reason to change my $281.50 opinion as of yet but the trade action today was okay and we continue to build on the wedging pattern that we have on the weekly chart.
Because of the wedging pattern and potential for frost I do think upside coverage is warranted but I wouldn’t be aggressively long via futures or extended cash coverage at this time. I’m still negative to the meal market for now but it is beginning to feel like the $281.50 area may hold support for now. We will continue to monitor the situation and comment accordingly.”
Oct ‘09 meal: Similar to corn, I don’t have much to add to yesterday’s comments (above). Meal didn’t do much to change the way the charts look to me other than we continue to shrug off lower prices for the second day in a row. We haven’t rebounded enough to make me think we are turning here so for now I am viewing the recent moves and profit-taking and position squaring for Friday’s report.
At this point I am waiting for the first day we close above a prior day high and then I will look to extend some coverage. We have call options in place; however, they are out of the money for catastrophic coverage. I still think we could test $281.50 but I also think this level of support may hold the market for now.
Bottom line: I’m looking for the market to experience an early high and late low tomorrow.
Oct ‘09 Meal – Support/Resistance for 09-10-09
(R3) Resistance 3: $302.80
(R2) Resistance 2: $296.60
(R1) Resistance 1: $293.70
Today’s close: $290.80
(S1) Support 1: $287.50
(S2) Support 2: $284.20
(S3) Support 3: $278.00
HOGS – Oct ‘09 GLOBEX
Open – $51.125, High – $51.95, Low – $51.00, Close – $51.45 Up $.475
Thoughts – Long Term (into December) – Negative
Yesterday I said: “I have to be honest and say I am walking around with my arms up in the air wondering what the scoop is in the hog futures. I can’t say we have made any leaps and bounds in the cash market or product sales but the futures continue on their way up. Today is the beginning of the Goldman roll and when the roll takes place you can pretty much throw logic out the window because the volume they need to get done changes the way the market trades, in my opinion anyway.
The cash numbers were mixed at noon but the cutout number showed loins around $7.00 lower on the day along with trimmings being $1.00 lower as well. Face value the noon cutout report would suggest a lower cutout number tonight but all other cuts were not established and they weigh on the overall cutout value so it is difficult to tell from the noon report. The Dec ’09 contract made a bottom on June 29th then rallied for 15 trading days into July 17th then started to decline; today marks the 15th trading day of the current rally.
One of the cycle indicators I look at has today begged as a high for the Dec contract and has it moving lower into Sep 25th. Since 1989 the Dec hog contract has rallied 14 years on average of $2.025 with a maximum up move of $3.875 in 1998 and declined 7 years on average of $1.30 with a maximum down move of $3.00 in 2008. As of today’s close the Dec contract has rallied $1.525 so we are not far from the average up move but if we test the max it would project a target of $51.35 which is actually near 50% (actual resistance is $51.125) of the way back to the July 17th high.
As of now I am still of the opinion that this rally is a good hedging opportunity in the Dec contact via a known risk strategy. If you have questions on what type of strategy to use for your operation email us at email@example.com.”
Oct ‘09 hogs: I am still of the opinion that this is a hedging opportunity via limited risk strategies for those that have nothing in place in the Dec ’09 contract. The deferred contracts rallied more than the front months did today because of spread activity. I have a sell signal for the Dec ’09 contract at $49.50 on a stop order with a risk management buy stop $.50 above the most recent high. This signal was good for today and is also good for tomorrow as well.
The pork cutout number was $.86 higher tonight and cash was mixed to higher. $50.00 is 62% of the way back to the July 31st high and should be viewed as resistance by the market. If we close the market above this level for two consecutive days then we could see a test of $51.125. It will be interesting to see how the market treats the $49.50 sell stop signal tomorrow and again this is a stop order where it is only good if it gets down to $49.50 which means it would be a sell on the way down.
Bottom line: I’m looking for the market to make an early high tomorrow then weaken as the day progresses.
Oct ‘09 Hogs – Support/Resistance for 09-10-09
(R3) Resistance 3: $53.50
(R2) Resistance 2: $52.525
(R1) Resistance 1: $52.20
Today’s close: $51.45
(S1) Support 1: $51.205
(S2) Support 2: $50.625
(S3) Support 3: $49.675
(S4) Support 4: $45.50
(S5) Support 5: $39.65
(S6) Support 5: $35.275
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