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CORN – Dec ‘09 Electronic
Open – $3.57 1/2, High – $3.64, Low – $3.54, Close – $3.59 3/4 Up $.01 1/2
Thoughts – Long Term (into December ‘09) – Sideways
10/01/09 I said: “Same thought applies to corn; early yields are coming in rather large so it is hard to get bullish at these levels. Today we sold futures against our call spread to hedge the delta which neutralizes our position without exiting our core position. I protects our gains to the downside but still leaves us open to the upside. If you have corn to purchase for feed I would hold off for now unless we close two day’s above $3.50 in the Dec ’09 contract. It looks to me like we should begin a move lower back toward the $3.10 area.
The wild card is still what the funds will do but they may be met with good farmer selling this harvest assuming the crop is as large as I think it is. I will remain bearish corn until we have two consecutive closes above $3.50 in the Dec ’09 contract.”
Dec ‘09: Looking at my comments above I said I was going to remain bearish until we had two consecutive closes above $3.50 and here we are, today was the second close above $3.50. I exited our delta hedges on Monday for corn and have also purchased some corn futures to give us upside above $3.60 which is where we are short a Dec ’09 call option. Our position is long a $3.20 Nov call and short a $3.60 Dec call with long futures to give us upside above $3.60.
There move in the market is linked to thoughts of cold weather, rain and snow in the forecast. The forecast prompted short covering as the general thought for the corn crop seems to be huge but if we have corn that needs to mature and we get a hard freeze then we could see some yield losses. I am of the opinion that we on a short-term higher run for now unless we can close two days above $3.76 in the Dec ’09 contract. If we achieve the $3.76 level and sustain trade above it then our next targets should be a quick $3.88 and then up to $4.08. I am not holding my breath for significantly higher corn unless we have major freeze over a large area.
Please consider what is right for you and your operation when reading these comments, I have the luxury of adjusting a position hours or even days before I am able to update these comments.
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 10-08-09
(R3) Resistance 3: $3.79 1/4
(R2) Resistance 2: $3.69 1/4
(R1) Resistance 1: $3.64 1/2
Today’s close: $3.59 3/4
(S1) Support 1: $3.54 1/2
(S2) Support 2: $3.49 1/2
(S3) Support 3: $3.39 1/4
MEAL – Dec ‘09 Electronic
Open – $277.40, High – $281.50, Low – $276.80, Close – $281.00 Up $3.50
Thoughts – Long Term (into November ‘09) – Sideways/Higher
10/01/09 I said: “$285.50 has been an area of resistance for the last for trading sessions and actually has some significance technically. If the Dec ’09 contract wants to trade higher and get more buyers in the market it will need to get back above this level and trade there for a couple days. We are still long meal because of some longer-term setups in the charts but may possibly be adjusting our position next week. ”
Dec ‘09 meal: As mentioned above $285.50 is an area of resistance that meal would need to break through to get a shot at the bigger resistance level of $287.90. If the market gets above $287.90 for two consecutive closes that could propel us back toward the $300.00 level in the Dec ’09 contract. I have many indicators that are turning friendly in meal therefore we are long the Dec ’09 contract at this time. I have a cycle indicator that has meal moving higher into the end of December on the longer-term weekly charts.
We are in a time where anything can happen in both corn and soybean meal therefore I want to maintain some type of long position because we are hedged in hogs and need to have our feed covered.
Bottom line: I’m looking for the market to experience an early high and late low tomorrow.
Dec ‘09 Meal – Support/Resistance for 10-08-09
(R3) Resistance 3: $289.20
(R2) Resistance 2: $284.50
(R1) Resistance 1: $282.70
Today’s close: $281.00
(S1) Support 1: $278.00
(S2) Support 2: $275.00
(S3) Support 3: $270.30
HOGS – Dec ‘09 GLOBEX
Open – $49.075, High – $52.05, Low – $48.95, Close – $51.75 Up $2.625
Thoughts – Long Term (into December) – Negative
10/01/09 I said: “I said yesterday that I wasn’t going to pay much attention to the buying that brought the market back off of its low yesterday and I believe today’s action confirms that thought. I am not sure exactly how the cutout report is put together but they have the following information listed at the top of the report.
NW_LS500 ***RESENT FOR CORRECTION ON CUTOUT AND 23-27 LBS HAMS***
Des Moines, IA Thu, Oct 01, 2009 USDA Market News
Compared to Wednesday’s Close: Fresh 1/4″ trim loins not tested, 1/8″ loins steady to 2.00 lower; butts generally steady; sknd hams 20-23 lbs 2.00-4.00 lower, 23-27 lbs steady to 4.00 lower ; sdls bellies steady with weaker undertones; lean trimmings not established. Trading very slow to slow, with very light to light demand and moderate offerings.
What I find interesting is when they report today’s change for each category they report Loins up $1.14, Butts down $.44, Pic down $.06, Ribs down $.01, Hams UP $8.14 and Bellies down $1.46! This makes no logical sense to me at all but it is what it is I guess. My point here is I don’t know how much I buy into tonight’s cutout number being as high as it was. It was originally sent out as up $.53 then revised to be up $2.05 on the day. Hmmmm.
We are still short hogs and will continue down that path for now. Dec ’09 hogs closed below the short-term uptrend line today which is negative from a chart perspective. I think I want to see the market trade for at least an hour tomorrow to see if this cutout number is for real or not. Cash hogs were listed higher this afternoon as well. To see the reports click on the cash and cutout reports link at the bottom of this page.”
Dec ‘09 hogs: My how things can change in a matter of days! The Dec ’09 contract has been on fire the last two days closing $3.225 higher today than it did last Friday on most of which has been short-covering and fund buying. The thought remains that there will be additional index fund money moving into the livestock complex which may have some people preparing for that time to come and creating a false market in the process. I say false because cash has been moving slightly higher but there is no long-term evidence that suggests it will continue to remain firm.
Looking back from 1989 to 2008 we’ve had 15 years where the market has moved lower from the October 1st market close to the market close of November 1st. There have been 5 years where the market has moved higher during that same time-frame. The biggest up move we’ve had during this time-frame is $3.72 cwt in 2002 but the Dec ’02 futures were $39.45 on October 1st compared to $48.625 this year. The biggest decline we had was $8.175 in 2008 but again the futures closed at $62.975 on October 1st of 2008 vs. the $48.625 close we had this year.
If you add $3.725 to $48.625 you get $52.35 as a target for what has been the worst case scenario since 1989 but if you do the math on a percentage basis it equates a $4.625 move which would target $53.25 for this year based on the worst case percentage move from the last 20 years. All of this information is from close to close and doesn’t take into account any highs or lows in between these time-frames.
The average move up from Oct 1 to Nov 1 in the 5 years the market moved higher was 4.81% and the average move lower in the 15 years was 5.99%. We remain hedged in the Dec ’09 contract but we do have some $52.00 call options in place from last month. When we put the $52.00 calls on we sold $42.00 puts and $58.00 calls at $1.00 each to help pay for the $3.50 cost of the $52.00 call. Today we purchased our short $58.00 calls back for around $.55 to give us unlimited upside in the market but keep our downside coverage in place.
Until we see very good signs that our fundamentals have recovered I think this is a hedging opportunity using a KNOWN RISK strategy. $53.10 is going to be a key level of resistance and if we get two consecutive closes above this level then a quick test of $54.275 and ultimately a target of $59.15. We still need to see more buying but I want to make sure we have upside open positions if there were to be the case. Correlation charts suggest that we are within a week away from the last high the Dec ’09 contract will see for this year and then start a steady decline into the middle of November. Correlation charts can change daily so they shouldn’t be used as a sole decision making tool but they do carry some weight.
An opening above $52.05 tonight would not be a friendly opening to for the Dec ’09 hog contract but if we open below $52.05 then we have a shot at some more follow-through buying tomorrow at least in the early part of the day.
Bottom line: I’m looking for the market to make an early high tomorrow and weaken as the day progresses. This can be thwarted if we see big fund buying but I don’t know if that will happen so I go with what I see right now.
Dec ‘09 Hogs – Support/Resistance for 10-08-09
(R3) Resistance 3: $54.75
(R2) Resistance 2: $54.025
(R1) Resistance 1: $52.925
Today’s close: $51.75
(S1) Support 1: $50.00
(S2) Support 2: $49.85
(S3) Support 3: $48.75
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
Click here to view cash and cutout reports
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.