Over the years, many of you have heard me discuss short covering rallies, and how they end up. Tuesday is a perfect example, as the rally in gas ran up to key resistance and lost its mojo — all while total open interest declined. That is a pure definition of a short covering rally. Due to lack of buying from longer term interests, when the shorts cleared it opened the potential for profit taking and position re-assessment, which is what we got yesterday. I was startled that the $2.029 area did not find more buyers as that was near term support. The dip buyers didn’t show up until the market chased Monday’s lows. These types of $.10-$.15 daily swings may be on the way as the market redefines its directional bias. Keep you eyes on the Winter Strip and Calendar 2021 as they will hold the key for long term directional bias and not the prompt month whose directional movements are related more to daily fundamental data (pipeline issues and positioning for upcoming storage expectations). While prompt was clocked losing nearly $.20 the winter declined 25% of that. A note for traders, the Dec -20 contract is having a hard time at $3.00, keep an eye on that– trade the range but watch for any break on that contract.
