Author: Willis Bennett

Shocking — Down Day

Daily Continuous

After six days of gains for natural gas, prices went down yesterday, hopefully starting the consolidation period I have been looking for the last ten days. Today is expiration so the focus shifts to the Sept chart below:

Spot September Contract

Not a significant area of support but the area around $3.87 could be significant short term for the September contract either today or when it takes over as prompt. After the recent strength in the Aug contract and the trend of the last few expiration’s (discussed previously) — what happens today in the expiration is anyone’s guess.

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Beat Goes On

Daily Continuous

I have no clue what piece of information hit the market at 8 am (EDT) but prices started to garner strength peaking about an hour later at $4.187– sending all the momentum analysis to new levels of strength (though still overbought). Mentioned yesterday, that the recent trend of expiration’s has been strength during the process and this month looks to be continuing that trend.

Major Support: $3.722, $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198,
Minor Support: $3.821, $3.508-$3.485
Major Resistance: $4.054-$4.094, $4.187, $4.238

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Silliness May Continue But Reckoning Coming

Daily Continuous

Went into some of my reasons to doubt the sincerity of this run at this point in the Weekly section and I advise a brief look. Price may continue there ascent, as perhaps the uptrend will continue and add some more cushion before going off the board. The last four expiration months have. I will be on the sidelines in August and continue the downside trades (discussed last week) into the September contract.

Major Support: $3.722, $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198,
Minor Support: $3.821, $3.508-$3.485
Major Resistance: $4.054-$4.094

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Something Is Amiss

Weekly Continuation

Lots of charts this week with just some brief commentary about the market that is not trading “properly”. There is a slight odor beginning to emanate from price action though not sure what it is. Looking at the weekly chart above– it looks like a solid bull run with little or no correction for the last 8 weeks– that is not normal behavior (especially for natural gas). Some fundamental based traders tell me it is concerns about supplies going into the upcoming winter — at face value the market is not confirms such concerns. Look at the chart below:

Jan 22 Daily Continuous vs Aug 21 Daily Continuous

The blue line reflects the upcoming Jan ’22 contract and has narrowed on the recent run to only $.13 over August. That does not reflect substantial concerns about the upcoming winter supplies. Much less– it takes the value of storage off the table as it doesn’t cover the carry costs much less the direct cost of storage. Winter should be rising at the pace of cash (or Aug) if winter was an issue. Perhaps it too will run later in the fall. When Aug corrected (very briefly) early in July the spread was out to $.20 which does reflect some concerns (prompt declines – winter declines less).

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Got It

Daily Continuous

Well- prices finally got what they seemed to be thinking and that was trading above the $4.00 point. Now what? The market is over-bought in the extreme zone on both the daily and weekly chart; the market seems to be chasing 3 standard deviations above the 20 week SMA– let alone well above 2 standard deviations; and volume is stagnate. I will not be buying into this leg of the run– as stated numerous times in the last week– it needs to chill. Starting to look at some puts as it continues to get bullish blind.

Major Support: $3.722, $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198, $3.129
Minor Support: $3.821, $3.508-$3.485
Major Resistance: $4.054-$4.094

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Not Yet

Daily Continuous

Prices certainly gave the effort to hit $4.00, but once again, prices melted away toward the end of the day. You all know that I would like to see a retracement before prices can gain the momentum to break above that key level. This may extend lower as prices are declining late at night.

Major Support: $3.722, $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198, $3.129
Minor Support: $3.821, $3.508-$3.485
Major Resistance: $3.87-$3.905, $3.955, $4.054-$4.094

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Hmm — Perhaps a Blow Off

Daily Continuation

Not sure yet — but his is starting to take on the characteristic “blow off top”. Why do I mention — the market continues to run at 2 standard deviations above the 20 week SMA– the market continues to trade above the extreme zone on the Weekly RSI. That said, as I mentioned the other day, the Daily RSI still has not entered the extreme over bought but is starting to tickle it. Folks just keep buying it (for what ever reason) which leads me to start questioning the type of rally this is. Volume remains neutral and open interest does not seem to be waning. It seems that the target of $4.00 is a desire for a few– I still expect a retracement to assist in forming a base for the annual Q4 run. If it is a blow-off set stops tight otherwise join me in waiting for a retracement to reset length.

Major Support: $3.722, $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198, $3.129
Minor Support: $3.821, $3.508-$3.485
Major Resistance: $3.87-$3.905, $3.955, $4.054-$4.094

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What Is With Natural Gas

Daily Continuous

On a day where the energy sector was taken to the shed — Natural gas started with gains an kept them through the day— regardless of the dollar. It is starting to seem like some investors are wanting to see the response over $3.80 similar to the trade over $3.40 a few weeks ago. My comments are the same now as then when you are near the top of a range you sell for profits and if shorting outright– keep stops tight.

Major Support: $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198, $3.129
Minor Support:$3.508-$3.485
Major Resistance: $3.722, $3.769, $3.811-$3.821, $3.87, $4.66

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A Good Week to Go Fishing

Weekly Continuous

Gas traded an “inside” week — staying with in the previous week’s range and ended unchanged from last week’s close. I have tracked weekly ranges, opens and closes since the late ’90’s and I can’t think of the last time that the market closed almost exactly where it began (3.674 v 3.673). Friday’s close gave us three “tight” weekly closes (within $.026) which is also a pretty rare occurrence. This type of activity can clearly meets the standards of consolidation of the recent gains. Historically a market that is consolidating and struggling to establish momentum are usually resolved in the direction of the underlying trend with the release of technical “energy” that builds up during them triggers a significant range expansion.

That said, this market may be ready to attack higher levels but is missing some key indicators. Average daily volume has, on balance, declined since early June, while total open interest has increased significantly. Discussed here many times, bull markets have to keep feeding the beast. While it is good to see the gains in open interest, the change in “open interest” over time is a “lagging” indicator but historically substantial increases are inevitably followed by price declines while exceptionally low levels of open interest are characteristic of the construction of a low. Since the April low, the total number of contracts open in the market has increased from 1,164,269 to 1,466,459 (about 26% after already having increased from 1,117,622 with the January low). The last 155,057 of that increase has occurred since last month’s breakout through the October – November – February highs. That is a lot of new buying (which increases upside pressure on the bid) for a market that has gone absolutely nowhere for most of the last three weeks.

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Well — That Worked Out Well

Daily Continuous

Very rarely when I take a week off — does the market trade an inside week (within the previous week’s high and low)– usually it blows up or out and I am left to explain what happened. Natural gas trade in a tight range (almost as boring as the fishing) only accomplishing further consolidation for the next move (be it up or down). Go into some of the thoughts of up or down in the Weekly area — for there is ample reasons for both directions. Prices are still in the extreme over bought area on the Weekly RSI but not on the Daily RSI so the consolidation comment is warranted. Price are headed into a seasonal weak period of the year (late July into the Labor Day weekend) so that should put some pressure on the market. The bulls can hang there bias on the market continuing to trade higher and open interest gaining (see Weekly), but volume is starting to weigh on movements. Still consider a brief pullback in order, but natural gas is in a longer term bullish trend (as discussed here since last fall).

Major Support: $3.58, $3.538-$3.511, $3.385, $3.368-$3.316, $3.198, $3.129
Minor Support:$3508-$3.485
Major Resistance: $3.722, $3.769, $3.811-$3.821, $3.87, $4.66

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