Expected Correction Occurs

Weekly Continuation

Mentioned in the Daily last week that due to the “blow-off” formation that the gains from two weeks ago would be lost during the correction from the over bought condition. Prices did not quite make the week a technical “outside week reversal” but came close as they set a higher weekly high but not close below the previous week low at $6.247. While the collapse did not facilitate the defined technical term, the reversal after setting the high, was significant and invokes technical damage short term. This sets up an interesting battle– as discussed here for numerous months, price action during the month has been reasonably consistent over the last months as prices have weakened during the mid-month time period, only to find support and perform rallies into the expiration of the prompt contract. April has not provided that similar theme and has come into the expiration from a weakening bias. The trend for an extended period (nearly two years), has been for prices to rally into or during the expiration process (call it 5 days). There seems to be a struggle developing on the May expiration, as prices are weakening while the trend suggests the other direction. Not sure how the expiration plays out, but can express that the summer (Q2) rally has not achieved its goal regardless of the reversal.

The primary reason for that assessment is the open interest trail in the market internals– until a larger increase in participation (open interest positions) is in evidence the gas market is unlikely to trade a final high (September ’21 total open interest reached a high of 1,468,636 and final price high traded three weeks later. Open interest is currently 1,143,359 contracts- preliminary data from the CME, nearly the same as mid – December). As suggested a couple of weeks ago — this may be the end of a series of runs that may continue until June or July.

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