CORN – July ‘09 Electronic
Open – $3.84, High – $4.02 1/2, Low – $3.83 1/2, Close – $4.01 1/4 Up $.17 1/4.
Thoughts – Long Term (6 months) – Bullish/Higher
Yesterday I said: “Not much has changed from yesterday as far as my thoughts are concerned. I still think we have good support in this area and if you don’t have feed coverage in place for corn I would look to get coverage in this area. It was a relatively quiet day in the corn market not much to talk about so I will leave it at that. I am looking for an early low again tomorrow and a late high in the July ‘09 contract. We closed above $3.82 1/2 and if we do it again tomorrow then the market should begin to seek out the $3.95 area”
July ‘09 corn: Is it just me or do you want to say WOW too! I have no fundamental reason for why the market rallied today other than all of the moisture that has been coming down in the Midwest preventing producer from gaining progress in planting corn. I don’t think this is any big deal because of the types of technology we have now and the amount of ground that can be covered in such a short amount of time. As we closed above $3.83 1/2 yesterday I said another close above $3.82 1/2 and it would open the door to $3.95 and today the July corn wanted to get that pesky task out of the way and fast! The funds bought approximately 12,000 contracts of corn which is the most they have purchased on a given day since the end of March, 2009.
I have some positions to manage as I said last week and yesterday I have a feed needs covered with a long $3.80 June ’09 call option and I am short a $3.40 put in July ’09. The reason for buying the June ’09 call and selling the July ’09 call is the June is priced off of July futures but it cheaper to purchase than a July because of the time associated with its life cycle. I sold the $3.40 July put for $.11 and today they settled at $.05 7/8 which is getting near a level of exit because I don’t want to hold short options at minimal value if I don’t need to. It has served its purpose thus far.
The double bottom we have in corn at $3.70 July ’09 has since held as I suspected and as of right now the market is poised to test the most recent high of $4.17 1/2 BUT we need to get another close above $3.93 3/4 and preferably $3.99 1/4. Again, if you don’t have coverage in corn I would suggest looking into a strategy to do so. I don’t think I would chase the market at this point but I would have a plan ready for any price break we get. TALK WITH YOUR BROKER to make sure your position works within your operation and as always, do what is best for YOUR operation and not what some yahoo on the internet writes about!
Bottom line: I am looking for the market to experience an early high and a late low tomorrow. As mentioned I will be looking to exit the short $3.40 July ’09 put option I have in place to avoid any additional risk that could be associated with this position.
July ‘09 Corn – Support/Resistance for 04-30-09
(R3) Resistance 3: $4.17 1/2
(R2) Resistance 2: $4.08 3/4
(R1) Resistance 1: $4.04
Today’s close: $4.01 1/4
(S1) Support 1: $3.98 1/4
(S2) Support 2: $3.94
(S3) Support 3: $3.91 3/4
MEAL – July ‘09 Electronic
Open – $303.50, High – $320.30, Low – $302.50, Close – $320.30 Up $16.30
Thoughts – Long Term (6 months) – Bullish/Higher
Yesterday I said: “I said not in a hurry to buy meal but we didn’t get an early low and a late high like I thought we would today. I am staying with that thought for tomorrow because the hourly chart was searching for a short-term bottom today which I think will show up in early trade tonight. I am still looking for a test of $296.60 in the July ‘09 contract at some point and we may have a chance to get it in the near future as the rumor today was the Chinese were going to cancel some soybean orders. I look for buying to surface after early selling in tomorrow’s session.”
July ‘09 meal: As mentioned above I was looking for early selling today, which we got as we made our day session low in the first hour of trade and then from there it was all higher. I am expecting follow through buying tomorrow but I need a close above $318.90 to think we will have any shot at touching $337.20 again. I am looking for an early to mid-day high tomorrow and then have the market retreat going into the close. As I said the other day I was long $320.00 call options that were exercised on Friday in the May ’09 contract and I rolled them to July ’09 futures yesterday to avoid the delivery process in May. I will be looking for an area to protect equity in these positions tomorrow if given a chance because I am not sold on a higher meal market just yet as I think we will need to get through most of May before we get going to the upside again. I want ownership of meal but I don’t think I would come into the market right now if I didn’t already have purchases on the books. If anything I would use a limited risk strategy via options if you are just entering the market.
Bottom line: I’m looking for the market to experience an early high tomorrow and a late sell off tomorrow. I am short-term skeptical of the meal market but I will change my mind with two consecutive closes above $337.20 in the July ’09 contract.
May ‘09 Meal – Support/Resistance for 04-30-09
(R3) Resistance 3: $337.20
(R2) Resistance 2: $323.20
(R1) Resistance 1: $321.40
Today’s close: $320.30
(S1) Support 1: $315.90
(S2) Support 2: $313.5
(S3) Support 3: $311.40
HOGS – June ‘09 GLOBEX
Open – $66.10, High – $66.975, Low – $65.35, Close – $66.75 Up $.45
Thoughts – Long Term (6 months) – Friendly
Yesterday I said: “Well June ‘09 hogs got hit again today, the only good thing is that we rallied into the close. There seemed to a decent number of buy orders coming into the market via the Globex. I said there was a buy signal for today at $68.90 on a stop today but we didn’t get there which turned out to be a good thing. I did move my positions around to provide more upside potential should we get a rally off of these new lows, I rolled down some call options that were out of the money down to $68.00 and $69.00 in the June. I was wrong on the early low and late high today but I think we should see this action tomorrow.
The cutout was down $1.44 today but it was up $.45 yesterday so with all things considered it isn’t that big of a decline in my book but on the same token I trying to be objective when looking at this situation and use logic when thinking instead of emotion and fear. The market and media does a great job of instilling the latter into us and it feeds on itself. When I look at the market I try to think about what I know about it. 1.) Swine Flu is providing plenty of negative press, 2.) packers will not do anyone any favors and why should they, it is business for them just as it is for the producer but it stinks they have as much control as they do. 3.) We CAN NOT get swine flu from consumption of pork so there is no fundamental reason at this time (other than import bans from other countries from the select states that have swine flu in the U.S.). 4.) I have a cycle low the end of this week week, 5.) we left a HUGE gap at $71.25 in the June ‘09 contract’s weekly chart and gaps tend to get filled.
After looking at all of this information I ask myself if I want to try and trade the market six times in a day to scalp some small gains for position myself for something bigger down the road. In my experience I have usually been happier with the positioning approach vs. the trading approach especially when it comes to events. The big thing is trust your research and have a contingency plan in place if you are wrong but you need to deal with the emotion and keep it under control as much as possible. If you will read the comments I wrote on Saturday the 25th, (click on the 25th on the archive calendar to the right of the screen) you will see what my thoughts were then and I wrote that in an un-emotional state.
The market will indeed prove me right or wrong from a market direction perspective but the bottom line is managing your positions and your equity and that is what I look to do. My CONDITIONAL buy order for tomorrow is IF we open below $65.65 in the June ‘09 contract then I would have a buy stop at $65.90 with a risk management sell stop about $.25 below the current low at the time of your fill.”
June ‘09 hogs: Well, the market finally took a breath from its recent retreat from the fears the public has associated with the H1N1 flu. The Department of Homeland Security and USDA have done a good job of trying to accommodate U.S. Hog producers by referring to the flu virus outbreak as the H1N1 flu or the 2009 H1N1 flu. I talked on Saturday in my comments (click here to read) what I thought would happen with the market and so far most has come to pass; I said we should see a sell off on Monday and Tuesday before settling down as well as talk about how many hogs may be killed in an effort to prevent the spread of this flu. Today we heard our first story the Egypt is killing off 300,000 head of hogs to prevent the spread of the H1N1 flu virus which they don’t yet have. There was also a couple of reports that China was killing hogs as well to prevent the spread of the H1N1 flu virus which hasn’t been found their either but I COULD NOT VALIDATE THE REPORTS ON CHINA so they are just that rumors at this time.
It is interesting to see the cutout down $1.54 today and the June ’09 futures sell off by .425/cwt since the release of the cutout number only to move back to near unchanged as I write this. It feels like those that were going to puke positions have done so in the deferred months but as far as May ’09 is concerned it is toast in my opinion. I am looking for the $65.35 area in June hogs to hold for now as we search for more “news” to trade. As I have said for a nearly a week new I have a cycle low projected for the end of this week.
Bottom line: I’m looking for the market to be lower tonight and be quite in-active until tomorrow where I look for a late high again.
June ‘09 Hogs – Support/Resistance for 04-30-09
(R3) Resistance 3: $68.32
(R2) Resistance 2: $67.20
(R1) Resistance 1: $66.825
Today’s close: $66.75
(S1) Support 1: $66.475
(S2) Support 2: $66.10
(S3) Support 3: $65.35
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