Hog Comments - 02-05-09 - Are hogs setting up for another Friday rally?

CORN - March '09 Electronic
Open - $3.58, High - $3.72 1/4, Low - $3.56 1/2, Close - $3.71 1/4 Up $.13

March '09 corn opened slightly weaker last night, tested the $3.56 area like I thought it would and bounced from there.  We got off to a slower start this morning but it didn't take long for the buyers to kick in today.  There was good volume in today's upward move of the market compared to the last few days were down.  

I didn't buy corn today because I am already long futures against $3.60 puts equaling a synthetic call option.  I also have some short $3.80 May '09 puts and long $3.50 April '09 puts for (reverse call spread) some additional coverage to the upside because I didn't want to be flat long futures with my risk unknown.  It looks like the market wants to call this a bottom and move higher from here.  We closed below $3.59 yesterday but like I said I wanted to see it close below that level for two days before I changed my mind about market direction. 

Bottom line - I expect March '09 corn to open slightly lower tonight and move lower initially to find some support before making another run higher.  Ultimately I think we will see additional buying above today's high of $3.72 1/4 tonight or tomorrow.  $3.69 is a support area I think we could test tonight before we get the market trading higher again.  I will again go with better trade tonight and tomorrow with an ultimate objective of $3.81 1/4 to $3.87 1/4.  I think $3.81 1/4 is possible for tomorrow but $3.87 1/4 is stretching it.

MEAL - March '09 Electronic
Open - $299.90, High - $311.00, Low - $298.70, Close - $308.00 Up $7.50

As I said yesterday I had conflicting information, I have a cycle indicator suggesting we can still move lower but the price action suggested the market's recent slide was slowing.  We moved higher as expected today and we also closed above the $305.00 level I have been talking about.  Now that we have closed above $305.00 I am looking for the next close to be above $309.00.  I we can sustain trade and close above $309.00 for a couple of days (Friday especially) I will then project a challenge of the $326.00 high from January 23rd, 2009.  

Bottom line - I am not a huge fan of the way the March '09 contract closed today because it broke $3.00 in the last hour of trade.  I expect the March '09 contract to open slightly lower tonight and possibly test $305.80 and find some support.  I still think we have more upside to go tomorrow with new buying above today's high of $311.00.

HOGS - April '09 GLOBEX
Open - $60.75, High - $60.875, Low - $59.80, Close - $60.25 Down $.625

I said yesterday I expected an early low and a late high today and we did get that with the day session low being set in the first hour and the high was matched in the 2nd, 3rd and 4th hour of trade.  We closed the day right at the old contract low of $60.25 and if we have two consecutive closes below this level it will not look good for the April '09 contract.  I feel like the big boys are playing games with the market to make us think one thing so they can do another.

That said I have a big buy signal at $60.65 on a BUY STOP ONLY.  This signal is only good if the market rallies back up through this level.  If the buy stop is touched I would have a risk management stop $.25 below the most recent low.  IF this signal is good it is one that will send this market screaming higher.  This signal plays right into my little theory that the big guns are playing games.  I would expect massive short-covering if this signal is good.  If you have noticed I have used the word if several times in the last sentence so please don't bet the farm on a possibility.  I am stating what I see in the charts and what I talk about should not be taken as recommendations because like always I can change my mind and position hours before you even know about it.  Please work with someone you trust and do what is right for your operation.  

Bottom line - I am looking for tomorrow's low to be during the first hour of trade if not the open.  I think we will have better/higher trade all day tomorrow unless we get a beat down in the cash market then all bets are off.  If we stay constant I expect better trade tomorrow with a possible test of $61.20 to $61.55 and if this signal is good I wouldn't be surprised to see a limit move higher.  Limit is not my projection tomorrow but I throw it in there because of the capabilities of this signal, it is one of the most powerful signals a chart can have at either a top or bottom.  Again, stay objective in your decisions and don't get caught up in the hype of market potential in my comments. 

NW_LS500
Des Moines, IA     Thu, Feb 05, 2009     USDA Market News

USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M.
Purchases equated to FOB Omaha Basis.

Compared to Wednesday's Close:      Fresh 1/4" trim loins
not established; boston butts steady to 1.00 higher;, sknd hams 17-20 lbs
steady, 23-27 lbs steady to 1.00 higher; sdls bellies 14-16 lbs steady;
and lean trimmings not tested. Trading slow, with light demand and mostly
moderate offerings.


-----------------------------------------------------------------
Loads PORK CUTS          :              71.0
Loads TRIM/PROCESS PORK  :
-----------------------------------------------------------------

USDA ESTIMATED PORK CARCASS CUTOUT
Based on FOB Omaha carlot pork prices and industry yields.

           Calculations for a 200 lb Pork Carcass
        53-54% lean, 0.65"-0.80" backfat at last rib
-----------------------------------------------------------------------
         Total                   Today's Primal Cutout Values
Date     Loads      Carcass    Loin    Butt   Pic     Rib   Ham  Belly
-----------------------------------------------------------------------
02/05        71.0      57.14   74.66   58.23  40.38 101.13 39.34  72.31
Change :               -0.02   -1.41   -0.43   0.01  -0.51  1.63    unc
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Thu, Feb 05, 2009     USDA-IA Dept of Ag Market News

National Direct Hog Price Comparison

--------------------------------------------------------------------------
                :  National   :    Iowa     :   Western   :   Eastern
                :             :  Minnesota  :  Cornbelt   :  Cornbelt
--------------------------------------------------------------------------
   Base Price is the price from which no discounts are subtracted and
   no premiums are added.
--------------------------------------------------------------------------
BARROWS & GILTS :  1.30 lwr   :  1.55 lwr   :  1.53 lwr   :   .57 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 44.00-58.45 : 44.00-58.45 : 44.00-58.45 : 44.00-56.08
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    54.55    :    55.52    :    55.75    :    52.70
--------------------------------------------------------------------------
Head Count      :   24,971    :   11,311    :   15,212    :    9,295
==========================================================================

 

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.