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Corn – had a lackluster day all day today as it tried to find direction. The crop progress report shows the United States 68% planted as of Sunday May 2nd, that is phenomenal for this time of year. The planting pace should continue to weigh on the market but the Chinese buying still in the back of everyone’s mind should also keep decent support under the market as well. If the market is going to make another run higher we need a close above $3.74 3/4 for two consecutive days and then we could see $3.83 and $4.02 as price targets.
The Dow Jones was 143 higher today and the dollar index was also higher but the dollar needs to get a couple of weekly closes above $81.90 before we see more upside in this market. The market didn’t seem to care about outside influences today as the market traded lower on lighter volume compared to what we’ve experienced over the last week.
Bottom line – The intraday charts suggest corn makes an early low tomorrow. Now is a good time to buy call options on corn and buy cash hand to mouth until fundamentals change.
Meal – took it on the chin today and that’s alright if you are a hog producer. I mentioned last week that I had a cycle high in the July ‘10 contract and nothing has changed as far as the cycle is concerned. I’m looking for lower market movement into the 3rd week of May or so before finding some solid support. The July ‘10 contract had a downside reversal today as we traded above Friday’s high and closed below Friday’s low. This action would suggest more downside is on the way if we sustain trade below $285.00.
Meal, like corn, still allows profits to be locked in on hog production. Now is a great time to buy call options just like I said in corn and buy meal hand to mouth OR if you are worried about basis levels narrowing then buy the cash product and purchase puts. Hogs are on slippery ground technically and could experience a sell off and if that happens the producer margins will shrink if corn and meal move higher. Make business decisions.
Bottom line – The intraday charts suggest meal makes an early low tomorrow.
Hogs – June hogs posted a .60 gain today but the market closes exactly where it opened. This type of action is called a Doji in Japanese Candlestick terms and warns of a potential price reversal. It isn’t a sell signal, just a warning. I’m still of the opinion that hogs could trade lower as we move forward in the June ‘10 contract but if we close two consecutive days above $87.80 then the test of $83.70 was successful and we should make another leg higher. If $87.80 holds as resistance then it would suggest the most recent low of $83.70 should be tested again and more than likely taken out.
The cash was considerably higher today compared to the cutout, the cutout was up $.49 which wasn’t enough to keep pace with the higher cash. I haven’t seen any weird orders come into the market as of late but I continue to look for them. If you have profits in your pigs you should be looking to protect them in some way or another.
I’ve said my gut feeling was negative toward the Jun ‘10 contract and I’m still in that camp. I would suggest having a contingency plan to sell if the market takes a nasty turn and keeps going. If you don’t want to sell then at MINIMUM buy some put options or a known risk strategy should be used to protect profits as well as protect against any events that have the possibility of popping up like H1N1 proved to us last year.
Bottom line – The intraday charts suggest hogs make an early high tomorrow.
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.