Author: Willis Bennett

Concerns From Europe

Daily Continuous

While the NYMEX continues to range trade the European and Britain gas contracts have been screaming, eclipsing the highs from early October (same period that the prompt Nov set the high for NYMEX). My concern is that the run over the pond finds its way to the US as it did last fall. So far, the mild forecasts have provided the hedge folks with a good short if long the Dutch contract. That is what bothers me if those shorts are forced to cover due to forecasts changes. Will look at the data from the CFTC over the weekend to find any clues. Until then, will continue to work the range.

Major Support: $3.734, $3.63, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.93, $4.02, $4.127, $4.20

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Prices Continue Calm Behavior

Daily Continuous

The action was quiet and likely to be lighter as the week moves on. Several folks have mentioned that the way the Holiday sets up — folks will be taking time before as well as after the Holiday. In spite of the folks traveling volume was stronger as it has been on the last three Mondays. Expect this type of behavior to continue with this caveat– the amount of open interest (bulls loosing faith) that has left the market during the month, leaves the potential for upside bias and the last nine months being well did into expiration, may eventually run prices.

Major Support: $3.734, $3.63, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.93, $4.02, $4.127, $4.20

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Gap Closes — Price Reversal

Weekly Continuation

Discussed it in the Daily last week, but prices preformed a reversal after the early week closure of the Daily and Weekly Gap. Following Monday’s reversal day prompt gas traded quietly (as compared to the to recent volatility), with substantially less volume than the prior week, but on Friday the declines declined below last week’s low by $.013 to leave a technically bearish “outside” week reversal. This creates a price negative technical presumption and January ended the week in the lower quarter of the recent range traded and on a continuation basis the lowest close since July 16th.

Price action seems to develop the construction of a trading range as prompt gas attempts to define some kind an equilibrium. A year and a half ago prompt gas rallied from its July expiration multi – year low but it wasn’t until August that trade through the May high resolved an extended trading range to the upside and a confirming higher low in September provided some definition to the uptrend.

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Range, Range, Range

Daily Continuation

As explained last week, the market seems to be testing a narrowing range between support and resistance. Last week provided some indication of bias as discussed in the Weekly area. Here we sit at the low (support) side of the range and prices seem to be gaining on Sunday night. Read the Weekly for expectations for the week.

Major Support: $3.734, $3.63, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.93, $4.02, $4.127, $4.20

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Same Tune

Daily Continuous

Not much to say post storage release– prices continue to consolidate and some patterns have started to develop during the trade day which I will go into over the weekend. Unfortunately, the prices remain in the middle of the recent range developed. Continue to play the range. Heads up — the Daily will be available on Dec 20, 21 and 22 there will not be a Daily on the 23rd through the Holiday weekend. Will update on the Daily and Weekly report out on the 27th.

Major Support: $3.734, $3.63, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.93, $4.02, $4.127, $4.25 $4.61, $4.67, $4.735, $4.825, $5.10

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Neither Support Nor Resistance Tested

Daily Continuous

Prices extended to the high side of the range but did not get near the true resistance area. Volume continues to decline during this consolidation phase. It should be considered as a consolidation process after the tremendous declines and need to be digested. The results from this phase will likely define the bias for the near future. Will be discussing the trends of expiration for the last 9 months in the coming week, as we are headed to lighter trade, due to the Holidays, and the market could become subject to volatility.

Major Support: $3.734, $3.63, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.931, $4.02, $4.127, $4.25 $4.61, $4.67, $4.735, $4.825, $5.10

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Testing Support

Daily Continuous

The declines tried to test support but could only get down to $3.686 and did not quite get to support before finding buyers. Why did that happen with forecasts remaining bearish through the day (fundamental folks told me)? Guess Mother Nature (or the forecasts that claim they can predict) flipped during the late morning? What ever– you fundamental traders can be delusional at time. Think a nice range is developing here between $3.63-$4.085– play it accordingly.

Major Support: $3.734, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.931, $4.02, $4.127, $4.25 $4.61, $4.67, $4.735, $4.825, $5.10

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Rally, Gap Closed, Selling Commences

Daily Continuous

On script, the open was stronger, only to run into the selling on the high side of the gap. The declines were impressive considering that both the Dutch and Britain contracts closed at the highest levels since early October (10% daily gains). Perhaps we can put that garbage, surfacing amongst fundamental traders last fall, to rest. Never understood the relationship, as the US has a finite amount of LNG export capacity and has been running near those limits most of the fall (regardless of the Dutch price). Fundamental folks always need some sort of narrative to explain the rallies or the declines– usually a useless effort. Now we have another narrative, this time about the weather– yup — Chicago beaches will be open for the Holidays. Wonder how fast that will change? As mentioned a couple of weeks ago, the bias in this market is bearish and selling (or shorting) rallies is critical for economic success. Not saying you can’t buy the dips — support areas– but until the market does something to change the bias this should be the strategy.

Major Support: $3.734, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.931, $4.02, $4.127, $4.25 $4.61, $4.67, $4.735, $4.825, $5.10

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Prices Should Continue to Attack Gap

Daily Continuous

Discussed last week’s action in the Weekly area of the web site so will not go over here. Each day last week after the large Monday drop– prices attacked the gap left from the Monday open and would expect the same behavior today. One of my fundamental traders said something to me last week which was basically– forecasts could not get any more bearish so any changes will likely add to demand forecasts. The remainder of December could get very interesting with open interest low (occasionally, an indicator of a bottom forming) and the summer ’22 strip looking stronger than the winter months (having closed to a meager $.13 discount to prompt) suggests the potential for a counter trend run. Did I mention that expiration of the last nine months have had rallies.

Major Support: $3.734, $3.584-$3.522
Minor Support:
Major Resistance: $3.91-$3.931, $4.02, $4.127, $4.25 $4.61, $4.67, $4.735, $4.825, $5.10

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Prices Find Near Term Bottom

Weekly Continuous

Following the previous week’s close of $4.132, when trading resumed on Sunday night the first trade was $3.826, creating a substantial gap in both the weekly and daily charts (discussed in the Daily last week). January recovered about $.06 during the day but found selling at the violated 200 – day SMA…the first violation of the 200 – day since April 6th, and then traded down to $3.630 with the highest volume since the reversal from the October 6th high. The prompt worked higher after Monday’s action with both volume and volatility (and open interest) diminishing. The high traded on Friday afternoon but still left January $.207 lower with a weekly continuation gap between $4.042 – $3.965. This action has left the the short term momentum indicators severely over-sold.

Since the October 6th high prompt gas has fallen $2.836 or 43.9%, while the summer ’22 strip has lost only $.117 from its close on October 6th, equaling 3%. It should be noted that the summer strip posted its its last high on 11/27, $4.334 and has fallen from that high to a low 18.8% from that high. Total open interest continues to fall as traders show little interest in either speculation nor hedging at this point. Will look at total open interest this week and if there is some interesting aspect to the declines — will update during the week.

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