CORN – Sep ‘09 Electronic Open – $4.7 3/4, High – $4.07 3/4, Low – $3.88 1/4, Close – $3.93 1/2 Down $.13 3/4
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Last week I said: “I was looking for more upside today but didn’t get it, the market had relatively low volume and backed off more than it gained yesterday but still closed above the $4.00 1/2, 62% retracement support level. We tested yesterday’s high and matched it but didn’t get above it to trigger the stops that I believe were around $4.09 1/2 to $4.10. The July ’09 contract did seem to have good support at $4.03 1/4 which is where we settled for the day.
I am looking for the July ’09 contract to move sideways to lower tonight while it looks for some more news. The U.S. military is monitoring a North Korean ship that they feel is transporting weapons and if anything happens to escalate the tension between North Korea and the U.S. then we may see a jump in oil prices and in theory that would be friendly to corn. This story is in its early stages from the public’s view point so it is hard to tell the market affect with such little information at this point.
I still look for buy stops at $4.09 1/2 to $4.10 but we need to get there first. If the July ’09 corn market closes below $4.00 1/2 for two consecutive days then I am looking for a test of the low at $3.70 but for now support is holding. Again, it was a low volume day today and tomorrow is Friday and that should give us some insight to how people feel going into the weekend after a week of trading that has lost ground.”
Sep ‘09 corn: I made comment last week that if July ’09 closed for two consecutive days below $4.00 1/2 that I was looking for a test of $3.70 and today was the second close below that mark and we got within $.10 of the target today. Crude oil has taken a tumble of over $4.00 a barrel in the face of the protests in Iran and also the talk of the possibility of the U.S.S. John McCain intercepting the North Korean ship, Kang Nam. The U.S. Dollar Index has once again gained some strength and is forming a bit of a wedge type pattern on the daily chart which would suggest a breakout of whichever side comes first, up or down. On the weekly chart the U.S. Dollar Index is pausing and waiting to make another push lower toward its most recent low of 78.35 as it has respected all of the technical resistance points in this last move higher over the past four weeks.
As a risk management move on Friday I purchased some July $3.90 puts for $.02 1/2 to protect the short $3.70 Sept ’09 puts I have in place against the call strategy we have in place for upside coverage on corn. I didn’t have a “hunch” the market was going to move lower I just knew that that way the market was trading near the $4.00 1/2 level and there was uncertainty over seas so I purchased this puts from a pure risk management perspective. In my mind if we were wrong we still had upside in the market and if the market did drop we continue to lower our price of corn.
As you may have noticed I have changed the contract month I will talk about to September 2009 instead of July ’09. Most of the comments above are for July but from here on out they will be for September. The September contract seemed to find support $3.93 as we traded below this level several times today but failed to close below it in the hourly charts for the first three hours of trade. It looks to me like the market is looking for good support and something to hang its hat on and leads me to believe we may have done enough to the downside for now. I am looking for an early low and a late high tomorrow as we come off of a big move to the downside over the past week.
If we get to the $3.80 support level in the September contract I will most likely make an adjustment to our corn position and lower our price ceiling as doing so will be easier with the equity that will have been gained through the purchase of the $3.90 July ’09 put.
Bottom line: I am looking for the market to experience an early low tomorrow.
Sept ‘09 Corn – Support/Resistance for 06-23-09
(R3) Resistance 3: $4.01 3/4
(R2) Resistance 2: $3.97 1/4
(R1) Resistance 1: $3.95 1/4
Today’s close: $3.93 3/4
(S1) Support 1: $3.92 1/2
(S2) Support 2: $3.91 1/4
(S3) Support 3: $3.88 1/4
MEAL – Aug ‘09 Electronic
Open – $363.50, High – $364.60, Low – $351.10, Close – $352.30 Down $11.90
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Last week I said: “The buy signal from the other day was good at $371.50 and I said to have the risk management sell stop at $365.10 and I said to trail it up with a sell stop $1.00 below the prior day low. For tomorrow that would mean having a sell stop at $370.50 which is $1.00 below today’s low price. The August ’09 meal contract closed above the 50% retracement resistance level of $376.80 today and if we do it again tomorrow then I would venture to say we should look to test $396.80 again in the not so distant future.
The funds were buyers of approximately 1,000 contracts of soybean meal today and hold a rather lengthy position at this time. The U.S. Dollar Index traded both sides of unchanged today but moved higher on the day and looks like it may have some more room to the upside tomorrow early before taking a break.”
Aug ‘09 meal: The buy order that I’ve referenced over recent posts would have been stopped out of Friday at $370.50 for a $1.00/ton loss. If you remember correctly we moved our risk management stop from $365.10 to $370.50 which in this case would have saved a few dollars. Sometimes taking a loss can be the cheapest thing we can do in managing risk in a position because if there would have been any risk management stop order in place the loss would have gone from $1.00 to $19.20 on a position that could still be open!
We still have ownership of a call strategy that gives us upside from $360.00 to $400.00 in the August contract but we are not long futures until $320.00 in the August if we do nothing to adjust our short $320.00 put options. $346.70 is the 50 day moving average and probable target to the downside in the Aug ’09 contract for now. The market seems like it may want to take a breath tomorrow and have an early low or weakness early and then find support and try to short-cover. IF the market gaps lower (opens below $351.10) and then moves higher there would be a buy signal generated at $351.60 STOP with a protective risk management stop $1.00 below the current low at the time the buy stop was filled.
The hourly chart suggests a quiet opening tonight and perhaps some small buying above $353.20 if the market gets there.
Bottom line: I’m looking for the market to experience an early low and a late low tomorrow.
Aug ‘09 Meal – Support/Resistance for 06-23-09
(R3) Resistance 3: $360.00
(R2) Resistance 2: $357.90
(R1) Resistance 1: $354.60
Today’s close: $352.30
(S1) Support 1: $351.50
(S2) Support 2: $346.80
(S3) Support 3: $344.70
HOGS – Aug ‘09 GLOBEX
Open – $61.50, High – $61.60, Low – $60.275, Close – $60.85 Down $.95
Thoughts – Long Term (Into August) – Friendly
Last week I said: “ Interesting to note that I wasn’t the only person thinking yesterday’s cutout number was as sham. I spoke with several different people and that seemed to be the general feeling across the board, we’ve been duped! I said yesterday that I sold some July hogs after the negative cutout was released but I bought them back this morning when the market moved higher instead of lower on the open. It seems as if someone is trying to exit their short positions without creating a big splash and up move in the market and that is one way to do it, on negative news.
Well with all of the complaining out of the way, my cycle low was set for today and I could even argue tomorrow but none-the-less it is in this time-frame. It is premature from a chart point to say the bottom is in but based on the way the market is acting especially with the buying that absorbed a fictitious cutout number from last night I would say may be looking at brighter days ahead in the hog futures. I am not forecasting a runaway upside move by any stretch because we need cutout and cash to start moving higher but the significant downside futures pressure may be over for the time being. I will look for the second day that we close above a prior day high to give me more confidence in this thought, yesterday was the first time we did it since May 8th, 2009.
On a side note, the Producer Retirement Program had a press release today saying the program was terminated. You can read the release by clicking here.”
Aug ‘09 hogs: The August ’09 contract wasn’t doing to bad this morning until the grain market opened and set the place on fire to the downside. The cash bids this morning came in lower but on very few hogs and by the end of the day the cash market was higher per the USDA. Cutout was down mildly tonight on a few loads similar to Friday but it WAS NOT down $3.00 or anything so we will take the small down moves of $.35 like we had today.
The general feel for the cash market seems to be at least steady as well as the product side of the equation therefore giving us some limited downside risk in price for the time being. We all know how fast things can change so be on guard! So far my cycle low signal for last week has been good and it has the market moving higher into approximately July 14th, 2009. I don’t see anything to get concerned over from today’s trade and actually the August ’09 contract has held support and as long as we hold $60.525 tomorrow we should try to make another run toward $62.15 from Friday.
The monthly cold storage report was released today is showing a 5% reduction in frozen pork supplies from last month but up 1% from last year. Stocks of pork bellies were down 1% from last month and down 9% from last year. Click here to read the report from the USDA.
Bottom line: I’m looking for the market to make an early low tomorrow.
Aug ‘09 Hogs – Support/Resistance for 06-23-09
(R3) Resistance 3: $63.275
(R2) Resistance 2: $62.15
(R1) Resistance 1: $61.20
Today’s close: $60.85
(S1) Support 1: $60.525
(S2) Support 2: $60.15
(S3) Support 3: $59.50
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.