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Thursday, September 4, 2008

Hog Comments - 09-04-08 - Grains mixed and hogs are weak.

Dec '08 Corn Daily Chart
CORN
The market opened a few cents lower than the overnight close and then bounced only to find sellers.  Eventually the market did make a pop higher in the first hour of trade and was trading higher at 10:30 a.m. CST then where it opened.  If this is the case approximately 80% of the time we will close above where we opened and in this case that price was $5.57 3/4.  I have yet to make any changes with my long 1/2 position in corn, I had an order to exit and take profit at $5.80 which is 3/4 cent below our gap we left on Tuesday.  I said yesterday the charts showed a buy signal at $5.55 1/2 (I didn't act because I am already long) and closed well above where it needed to for the signal to be good.  The low for today was $5.55 1/4 which gave me another sign that says we are looking to bottom for now.  I have three items that suggest we are supported in this area and would like to move higher from here.  

My feeling for tonight/tomorrow is better trade, I think we may take a stab at the $5.80 3/4 area which is the gap we left from Tuesday's open.  Again, I am not bearish at this level but we do have Informa releasing it's estimates on yield tomorrow morning at 10:30 a.m. CST, this could very well effect prices if there are any surprises.  FCStone released their numbers earlier this week and they had a yield of 153.4 (**CORRECTION** I posted 154.5 in original blog post but that was Augusts number sorry!)and the USDA was 155 last month.  Again, better trade tomorrow unless Informa stuns the trade with bigger numbers than last month, they are usually on the high side of estimates so we will see.

Dec '08 Meal Daily Chart
MEAL
Dec meal traded higher today in the face of soybeans being lower all day.  There have been reports of cold temps in the northern eastern regions of South Dakota and the cooler temps are forecast for next week.  I don't think we can tank the meal/bean market for any great length of time with the potential of frost hanging over our heads.  We have visited with numerous grain producers over the past couple of days and they tell us the soybean crop has been taking it on the chin as of late due to lack of moisture.  This is in a localized area here in Eastern South Dakota and Southwest Minnesota.  I would have preferred to see the Dec '08 meal contract close above $343.30 today but it just wasn't in the cards.  

Like corn, I feel there is good support below the market at these levels and I am not a bear here.  I would really like the market to close above $343.20 tomorrow and if it doesn't I may need to adjust my positions next week.  I will hold my positions long at $350ish in the Dec '08 until tomorrow to see how we close for the week.  It is important to not get caught up in the day to day activity of trading because it can skew your longer-term thoughts and get you in a situation that you shouldn't be in.  I want to be patient here.  Again like I have said other times, if I see something I don't like I may exit without warning so please don't make trades based on my comments.  

Dec '08 Hogs Daily Chart
HOGS
Oct '08 hogs closed $.37 higher while Dec '08 was down $.35.  Like I said yesterday I have my short futures in the Dec '08 contract and I have long call strategies in the Oct '08 contract.  I rolled at a $.60 carry on Tuesday and the market closed today at a $.62 invert or Oct higher than Dec.  I am not bullish at this point but I am not bearish either, I still think we could get a bounce in the market in the near future.  The weekly charts are showing signs of warning you are short (I AM NOT SAYING EXIT HEDGES) and this is another reason I feel like we could make a small bounce soon.  I said yesterday that I had a buy signal at $69.00 on a stop if it got there (I didn't take it) and we did so thoeretically the chart is long Dec hogs but we didn't close above $69.00 where I would have liked to make me comfortable with the signal.

I talk a lot about signals and I tell you about them because it is something I see.  Just because I mention them doesn't mean you should do them nor does it mean I will act on them either.  I want to give objective information on what I see technically on the charts.  I don't know what the fundamentals will bring this evening but it looks like the market wants to be weak tomorrow in the Dec '08 contract.  The U.S. Dollar has given me three days of warning signals that would suggest a top is near.  I we reconsider my topping thoughts if the index closes stronger for the week.  

I will continue to keep my short hog positions in place until we see excellent signs of the market reversing action.  We have call option strategies in place in the Oct '08 contract for upside protection against our short futures positions.  We will stay with this position for now.

Bottom-line - I look for corn to be stronger tomorrow, meal mixed to higher and hogs mixed to lower based on a technical read of the charts.  Tomorrow is Friday so we could see some extra volatility around 12:45 p.m. CST for people to get into or out of positions going into the weekend.

Cash and cutout will be posted when it is released this afternoon.

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.

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