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Weather What Weather?

Daily Continuous

Daily Continuous

Major Support: $2.587-$2.522, $2.495

Minor Support: $2.596

Major Resistance: $2.765, $2.813, $2.892-$2.903, $2.94-$2.945, $2.998,

Minor Resistance: $3.074, $3.153

Well— we get a very favorable demand out look for the next 11 days (coldest weather the market has experienced in 3 years) and the market starts strong on Christmas night only to give up all the gains during the trading session. I said last week that “markets that don’t go up on bullish news are going down” is coming into play.  It is very hard for this trader to actively short this market due to the forecasts for next week — some early estimates are for a 300+ storage withdrawal for the week ending Jan 5th— and now we have an expiration coming up which has maintained a small rally in 12 of the last 13 months.  I have no doubts that the trade is looking further out the demand curve as temperatures warm after next week and matching that information with the production growth that has occurred during Dec (nearing 77 Bcf/d on a consistent basis) to maintain the bearish bias. That said, from a technical standpoint, the market has rejected three advances beyond the old support level around $2.75 (late Oct low with the Nov contract) which has now become technical resistance. I am not convinced that this will hold today depending on how many shorts have to cover in the thin Holiday trade, but I will expect the Feb lows of $2.522 to hold the low end today.  The rest of the week is anyone’s guess— but I wouldn’t bank on a big rally after today’s performance. 

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