CORN – July ‘09 Electronic
Open – $4.43 1/4, High – $4.46, Low – $4.40 1/2, Close – $4.49 1/2 Up $.03 3/4.
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Yesterday I said: “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.”
July ‘09 corn: The July futures didn’t open higher than $4.45 3/4 last night therefore the potential sell signal on the daily chart was not valid and therefore never executed. I still had my orders in to buy July corn at $4.30 or $4.53 whichever came first but I entered into a three way option position instead. I did this because the market hasn’t fallen as much as I thought it would and the U.S. Dollar continues to move lower in significant fashion. We made a late high today which isn’t what I thought was going to happen which added to the reason for the options position I entered into today.
Although we closed July ’09 corn above $4.49 1/4 want to see the market close above $4.49 1/4 for two or more days before I get extremely bulled up but the dollar index makes a pretty easy case to be friendly. Tomorrow will be a key day in the market as the trade will be looking for additional buying above the $4.50 level and if we close above $4.49 1/4 again tomorrow then I will be looking for a test of the $5.17 area over the coming weeks. Today I purchased Aug ’09 $4.60 calls and sold Aug ’09 $4.20 puts and Aug ’09 $5.00 call options for a net premium of $.00. This position will give us upside coverage from $4.60 to $5.00 (need to adjust at $5.00 if we get there) and technically we will not be long corn (from a futures perspective) until Sept ’09 corn reaches $4.20. Let me know if you have questions on this position because it is more complex than the simple explanation I just gave you are there can be margin call implications.
Bottom line: I am looking for the market to experience an early low and a late high tomorrow.
July ‘09 Corn – Support/Resistance for 06-03-09
(R3) Resistance 3: $4.72
(R2) Resistance 2: $4.68
(R1) Resistance 1: $4.50
Today’s close: $4.49 1/2
(S1) Support 1: $4.46 1/4
(S2) Support 2: $4.44
(S3) Support 3: $4.40 1/4
MEAL – July ‘09 Electronic
Open – $390.80, High – $392.00, Low – $383.20, Close – $387.50 Down $3.30
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Yesterday I said: “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.”
July ‘09 meal: I haven’t changed my mind on meal I don’t like the sell signal on the weekly chart but the way the dollar is dropping it is tough to not have some coverage in place because of the outside forces placed on commodities as a result of a weak dollar. I will continue to have a window type strategy in place until I see something that makes me want to adjust my position. As of right now we have near $40/ton of upside and downside from the $360 level in the August ’09 contract. I think the weak dollar is a bigger deal than what the Ag sector is giving it credit for, we as producers and agribusinesses look at the markets from a fundamental perspective and sometimes prices and fundamentals don’t make sense and I believe we are going back to that way of thinking.
Fundamentals will always win in the end but it is getting from point A to point B that provides confusion and I believe that logic will once again become an irrational thought when trying to “figure out” the markets from a fundamental perspective as long as the dollar keeps sliding.
Bottom line: I’m looking for the market to experience an early high and a late low tomorrow.
May ‘09 Meal – Support/Resistance for 06-03-09
(R3) Resistance 3: $393.90
(R2) Resistance 2: $392.20
(R1) Resistance 1: $391.70
Today’s close: $387.50
(S1) Support 1: $387.00
(S2) Support 2: $386.50
(S3) Support 3: $383.20
HOGS – June ‘09 GLOBEX
Open – $62.00, High – $62.05, Low – $59.75, Close – $59.75 Down $3.00 – Daily Limit
Thoughts – Long Term (Into August) – Friendly
Yesterday I said: “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).”
June ‘09 hogs: The June, July and August ’09 contracts all closed down limit today on fears of continued weak product demand. I don’t have much to add from yesterday other than now we closed two consecutive days below the $63.40 level I am looking for another leg down in the June ’09 contract part of which was included in today’s trade. Now, enough with the doom and gloom type talk, let’s keep things on positive note and be objective. If any of the June, July or August contracts open lower this afternoon then there will be a buy signal generated at $60.00 stop, $62.40 stop and $63.30 stop respectively. PLEASE take note that these buy signals are STOP orders which means the signal is CONDITIONAL as in we need the market to open lower and then move higher through today’s low before the signal is actually valid thus the buy stop orders. The way things have been going in the hog market I don’t think I would step in front of this market just yet, I want more confirmation that the downside is finished so I would want to see tomorrows close instead of acting on the potential buy signal.
The dollar continues to fall and will eventually help the export market along with the return of Russian buying (when it happens) and also the funds are short near a record amount of lean hog futures. When the day DOES come where things turn it looks like it could be swift and violent. The problem as always is when will this take place and man I wish I could tell you but this but I would be lying if I said I knew but the spreads in the market shows some optimism in the deferred months.
I will be attending the World Pork Expo in Des Moines, IA tomorrow and Thursday so there will be no comments. If you have specific questions please email me at firstname.lastname@example.org. If you read my comments on a regular basis you can subscribe to them and receive them by email when I post them. If you go to www.leanhog.net and look at the upper left corner of the page you will see a “Get commentary by email” form where you enter your email address to get my comments via email.
Bottom line: I’m looking for the market to make an early low tomorrow.
June ‘09 Hogs – Support/Resistance for 06-03-09
(R3) Resistance 3: $61.60
(R2) Resistance 2: $60.90
(R1) Resistance 1: $60.675
Today’s close: $59.75
(S1) Support 1: $59.50
(S2) Support 2: $58.40
(S3) Support 3: $56.40
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