CORN – July ‘09 Electronic
Open – $4.35 1/2, High – $4.45 3/4, Low – $4.34 1/2, Close – $4.44 Up $.09
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Yesterday I said: “The July didn’t follow through to the upside last week like I thought they may. The U.S. Dollar index took a break and has moved higher since June 3rd (last Wednesday when grains were down hard) and has been making its way higher just as corn has been making its way lower. Thus far my buy objective of $4.30 that I mentioned above was hit as it was the low on June 4th and has held as our low for now. The July futures are testing the old resistance level which is now support at $4.37 so this week’s objective will be to close above this level if the market wants to continue higher. The ultimate goal for higher markets from here would be a close above $4.50 for a couple of days like I spoke of in last week’s comments above.
It looks like corn will have some further downside or softness this evening and then make a move higher. We do have the monthly crop production report being released on Wednesday morning at 7:30 a.m. CST which will keep the market tame to some extent going into this report. I think we will be range bound between $4.30 and $4.50 in the July ‘09 corn until we get our numbers on Wednesday and/or the U.S. Dollar Index makes a big move in one direction or the other. The dollar tested a recent high of 81.12 but is failing to hold that level thus far and is looking like the small rally we’ve had may be over. I still need to see today’s U.S. Dollar market close before I am confident of this thought but for now if were to close as I write this the chart looks like its gearing up for another push to the downside.”
July ‘09 corn: The U.S. Dollar Index indeed closed ugly yesterday and set itself up for follow through to the downside today. As I write this the dollar is off .90 which is a sizable move for this index. I believe more of the buying or firmness in the corn market today was due to the weak dollar and crude oil than it was for people positioning for tomorrow’s report. The projections for tomorrow’s USDA corn crop production report are as follows:
08/09 Ending stocks – 1.607 with trade guesses ranging from 1.550 to 1.704; last month’s number was 1.600
09/10 Ending stocks – 1.071 with trade guesses ranging from .731 to 1.458; last month’s number was 1.145
It feels like the market is pausing in this area just below the $4.50 resistance area and is building a head of steam for a break out. I have no indications from a technical perspective that a break out to the upside is going to happen but it is my gut feeling. I continue to place a fair amount of weight on the U.S. Dollar Index for which I have given more weight to it than I have to the fundamentals of corn itself. Tomorrow will be a crap shoot because of the USDA monthly crop production report but my feeling is the market seems like it wants to move higher and with that being said they trade can spin this report any way they want it but my guess is up. I did buy a put spread today for $.05 1/2 to cover my downside exposure on my short $4.20 puts in my Aug ’09 call option strategy but I bought the put spread from a risk management perspective not because I think the market is going lower. If the Dollar remains weak tomorrow I think the market will trade that instead of the report if it is negative. If the report is bullish (along with a weak dollar) then I say look out, I think we test $4.50 in a hurry and I don’t think you sell the open like I would normally say!
Bottom line: I am looking for the market to experience an early high and a late low tomorrow.
July ‘09 Corn – Support/Resistance for 06-10-09
(R3) Resistance 3: $4.62 1/2
(R2) Resistance 2: $4.50
(R1) Resistance 1: $4.46 3/4
Today’s close: $4.44
(S1) Support 1: $4.42 1/2
(S2) Support 2: $4.39 1/2
(S3) Support 3: $4.38
MEAL – July ‘09 Electronic
Open – $401.60, High – $408.20, Low – $400.00, Close – $407.80 Up $6.10
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Yesterday I said: “As I mentioned last week about the sell signal I had on the weekly chart at $392.00, it is a tough signal to manage because it has two weeks to develop and if you are trying to use futures to manage the position you could get stopped in and out of the market several times which I believe would have happened at least once had a position been taken last week. As an update the July ‘09 meal futures closed above the $392.00 sell stop area on a weekly basis which means the signal is still good for this week but if we do not close below $392.00 this Friday then the signal is void. If this signal is good then I would expect a violent move lower in the July ‘09 futures. At this point I am willing to be a little more aggressive with only four trading sessions left on this signal so if I am long meal in futures (I’m not, I have options in place) I would place a sell stop (to exit a long position) at $392.00 in the July ‘09 with a protective buy stop to get back in the market $1.00 above the most recent high (in today’s case it would be $404.50 stop).
The July ‘09 meal market is showing signs of warning but this is one of those markets where it isn’t uncommon for these “warning” signals to show up and as I’ve said before a warning doesn’t mean sell it just means be on the lookout for a potential change in direction.”
July ‘09 meal: Today was a case in point for using stop orders to enter or exit a position. I still have the sell signal at $392.00 in the July soybean meal contract but if you will notice what I said yesterday it is a stop order not a market order to just go get short or exit long positions. Stop orders allow the market to prove itself to you before you take a stance in a trade or position. If I would have just gotten short last night or yesterday on the close it would have been stopped out of my position with a loss today because the market moved higher than $404.50.
Today was as good day for meal other than it settled near its high for the day. This brings up two interesting points for tomorrow’s trade, 1, we could open above today’s high of $408.20 which would create a sell signal at $407.70 or 2, we open unchanged to lower tonight which is a good sign of follow through to the upside. I am taking the side of a sideways to lower opening tonight and look for the market to be relatively quiet before tomorrow mornings report. My thoughts are the same with soybeans as they are with corn however I feel stronger about the potential of corn than I do the potential of soybeans.
USDA Soybean report guesses for tomorrow on:
08/09 Ending stocks – .114 with trade guesses ranging from .099 to .130; last month’s number was .130
09/10 Ending stocks – .211 with trade guesses ranging from .140 to .376; last month’s number was .230
Bottom line: I’m looking for the market to experience an early low and a late high tomorrow.
July ‘09 Meal – Support/Resistance for 06-10-09
(R3) Resistance 3: $430.50
(R2) Resistance 2: $409.10
(R1) Resistance 1: $408.30
Today’s close: $407.80
(S1) Support 1: $405.00
(S2) Support 2: $403.20
(S3) Support 3: $401.60
HOGS – Aug ‘09 GLOBEX
Open – $61.20, High – $61.925, Low – $60.30, Close – $60.525 Down $1.00
Thoughts – Long Term (Into August) – Friendly
Yesterday I said: “As you can see I have made the move from talking about the June ‘09 contract to the August ‘09 contract because of the expiration we are going to see in the June ‘09 contract in the near future as well as the limited amount of time we have in the July ‘09 contract. August was having an okay day today until approximately one minute before the pit closed; it sold off to end the day lower by over a dollar. The cash market remains weak even thought the bids varied this morning per the USDA’s noon report. The trade is still questioning the cutout and when we will see the product market recover, however, it will be tough without some of our export markets we lost to the H1N1 flu hoopla.
There isn’t much to say about the August contract other than we need to hold the support level (contract low) of $60.925 if we want to prevent another leg lower in the market. My cycle indicator is projecting a cycle low on June 17th for the August 2009 contract and has it moving higher into approximately July 7th. I am still impatiently waiting for the market to give us signs of optimism but it has failed to do so many times over in recent weeks. There is nothing to get excited about to the upside at this point other than it will be good if we can hold the $60.925 support level.”
Aug ‘09 hogs: Well so much for our trusty old support level at $60.925, it failed today and the market even closed below this level which also isn’t good, however, for the sake of confirmation of violated support I need to see the August contract close below $60.925 again tomorrow before I will agree the market is indeed headed lower. Today was quiet of course until the end of the day then we got some spread action going on between the July and August. The cutout was up .53 today which is now the second day in a row that we are up even though yesterday was only up .03 it wasn’t lower!
Cash hogs were lower today but there weren’t a lot of negotiated pigs (second lowest level since January 1, the lowest level was on May 21st) so the lower cash bids this afternoon are skewed in a sense. As I said before I need to see the August contract close below $60.925 again tomorrow before I am willing to say we will see another leg lower in the August contract. It is rumored that the cutout market may have bottomed or is now in the bottoming process therefore pressing futures much lower may be a risk in itself. I feel like we are near a bottom in the futures as well but we can’t seem to keep the markets all the way through a trading session therefore I am waiting for some confirmation of a rally before I get excited about the prospect of a rally.
Bottom line: I’m looking for the market to make an early low tomorrow.
June ‘09 Hogs – Support/Resistance for 06-10-09
(R3) Resistance 3: $61.90
(R2) Resistance 2: $61.30
(R1) Resistance 1: $61.125
Today’s close: $60.525
(S1) Support 1: $60.30
(S2) Support 2: New contract low.
(S3) Support 3: New contract low.
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