February 23, 2009

 

Chicago Mercantile Exchange hogs could open 20 to 60 points lower Friday (February 20) on possible leftover selling and steady-to-weak cash hog price calls, according to analysts and brokers.

 

Most contract premiums to CME's hog index, outside market pressure and negative packer profit margins could exert additional negative market influence.

 

The Dow Jones packer margin index for Thursday's operations was minus $11.44 per hundredweight, compared with minus US$12.52 the previous day. The index is based on a formula using USDA's pork cutout values and western Corn Belt hog prices.

 

By the same token, potential pre-weekend short covering and spot-April and nearby-June oversold Relative Strength Index conditions are bullish market considerations.

 

Also, Spot-April and May's drop to new seasonal lows on Thursday might give speculative bulls a reason to buy those contracts on Friday.

 

Meanwhile, deferred hog months could trade weaker given potential spillover selling modest electronic-Chicago Board of Trade corn declines.

 

April's Feb. 5 59.85-cent low is a price support level. The contract's 61.53-cent 10-day moving average is a resistance target.

 

June's Feb. 6 72.20-cent low is an area of price support. The contract's last monthly low was Feb. 5 at 72.10 cents.

 

June also has a chart gap between Thursday's 73.50-cent high and Wednesday's 73.85-cent low.

 

Pork bellies are seen flat to up 50 points on late-Thursday's steady fresh belly quote at $75 per hundredweight, March's oversold chart signal and possible short covering before the weekend.

 

There were three belly deliveries posted by CME late Thursday against the February contract that will expire on Feb. 24.

 

February's 77.80-cent Feb. 13 low is a price support area. The contract's last season low was on Feb. 9 at 77.00 cents.

 

March's last contract low was Feb. 17 at 76.22 cents. The contract's Feb. 9 77.40-cent low is a price resistance target.