Hog & Corn Comments – 11/04/09 Feed grains fall and hogs are stable
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CORN – Dec ‘09 Electronic
Open – $3.88 1/4, High – $3.98 3/4, Low – $3.75 1/4, Close – $3.84 Down $.06
Thoughts – Long Term (into December ‘09) – Sideway/Lower
Dec ‘09: Enthusiasm was once again on the prowl prior to the market open but follow through to the upside didn't last for very long as the market topped within the first five minutes of trade posting a high of $3.98 3/4. As mentioned yesterday it is hard to get a good grasp on what the market is going to do because of the irrational (as it pertains to fundamentals, weather and some technicals) buying that has come into the market place via the funds.
Today the steam ran out of the locomotive early, not to say that it won't be back but for today it faltered. We exited our long corn futures that we own against our long $3.70 puts at $3.90 1/2 and will look to buy the market at a lower level. This could change tomorrow but for now we are on the sidelines until we see good reason to jump back in.
If you have no coverage I would suggest you talk with your broker and buy some out of the money calls for catastrophic protection if this thing really gets moving. If $4.13 1/2 is breached and we close above it for two consecutive days the markets next target is the summer high of $4.73 1/2.
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 11-05-09
(R3) Resistance 3: $4.04
(R2) Resistance 2: $3.94
(R1) Resistance 1: $3.88 1/2
Today’s close: $3.84
(S1) Support 1: $3.78 1/2
(S2) Support 2: $3.72 3/4
(S3) Support 3: $3.57
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MEAL – Dec ‘09 Electronic
Open – $306.50, High – $311.00, Low – $300.00, Close – $301.60 Down $4.80
Thoughts – Long Term (into November ‘09) – Sideways/Lower
Dec ‘09 meal: Meal was weaker than the corn market today as it followed soybeans lower before corn broke as much as it did on the end of the day. I said I was looking for the meal market to experience an early low but that wasn't the case as the low came near the end of the day. We are still long our meal contracts around $297.00 and will continue with this position for now but will monitor it closely.
The meal market tested the old high of $311.40 and failed to close above it. This type of behavior suggests that we should see a slight pullback in the market and then take another run at it. I believe we will need the help of funds in order to do this but they didn't show up today like they have the past couple of days. Again as mentioned before it is basically up to the funds if they want to keep this market at this level, if their appetite for meal has expired then I would look for the market to back off but they are ultimately in control right now.
Bottom line: I’m looking for the market to experience an early low tomorrow.
Dec ‘09 Meal – Support/Resistance for 11-05-09
(R3) Resistance 3: $315.20
(R2) Resistance 2: $308.40
(R1) Resistance 1: $304.20
Today’s close: $301.60
(S1) Support 1: $297.40
(S2) Support 2: $293.20
(S3) Support 3: $282.20
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HOGS – Dec ‘09 GLOBEX
Open – $57.70, High – $58.15, Low – $57.175, Close – $57.80 Up $.25
Thoughts – Long Term (into December) – Neutral
Dec ‘09 hogs: The Dec '09 hogs looked tired again today as we had a $1.00 trade range which is relatively narrow for this market. The cash prices at noon were much higher and actually came in near the same high levels this afternoon. The market is once again giving signs of being top heavy at these levels but there really isn't much resistance between current levels and $59.225 so that remains an upside target. We are starting to see the same type of action we had in the middle of October, it seemed like every day was a warning sign but the market didn't break.
I am holding off on saying we are topping because of the way the market acted in October but the way we've traded the last two days is making me wonder. The market has shrugged off the H1N1 in the hogs on an Indiana farm which is good; let's hope China and Russia see it the same way. The U.S. Dollar Index broke hard today but is still above my line in the sand of 74.94, we are trading at 75.70 as I write this article.
The intra-day charts are suggesting an early low for tomorrow and then it shows the market providing strength for the balance of the day. This is quite possible as cash was up today and cutout was up slightly but not enough to keep pace with the big jump we had in cash. We remain in our synthetic put positions for now so we have downside risk protected in the market and the upside opportunity is completely open.
Bottom line: I’m looking for an early low tomorrow.
Dec ‘09 Hogs – Support/Resistance for 11-05-09
(R3) Resistance 3: $59.70
(R2) Resistance 2: $58.70
(R1) Resistance 1: $58.30
Today’s close: $57.80
(S1) Support 1: $57.325
(S2) Support 2: $56.75
(S3) Support 3: $55.80
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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