Author: Willis Bennett

Declines Expected, Is That It?

Daily Continuous

The declines, narrowing the premium left after Nov expiration, was expected but did not see $3.15 as support that would reverse prices $.17 higher. Clearly, some shorts looking for supportive news from the storage release got caught. Is this the only test of the premium low? Not sure, but we know from the Nov contract, where prices declined for the first four days of Nov being prompt, the gap from the premium never closed. In the Nov contract prices declined 15% and yesterday’s declines are only a 5% decline. Major issue for the bulls is the high for December gas is only a nickel away. Must make this call– as my Weekly discussed, two weeks ago, that gap area around $3.05 has now defined itself as major support for the near term. The fact that yesterday’s decline never tried to test that area does little to alter this view.

Major Support: $3.19, $3.101-$3.091, $3.047, $2.907, $2.822
Minor Support:$3.151, $2.98, $2.84
Major Resistance: $3.318, $3.361-$3.370, $3.423, $3.516

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Again, Failure at Resistance

Daily Continuous
Spot December Contract

Similar but not as much, November expired at a $.28 discount to December. Recall the premium Nov had to Oct was twice as much and Nov immediately declined but did not close that gap. I have been mentioning that I was expecting the Dec to decline to the key gap zone ($2.98-$3.047) regardless of whether the Nov contract closed and confirmed that gap. The market has shown no reason to diminish that expectation.

Major Support: $3.19, $3.101-$3.091, $3.047, $2.907, $2.822
Minor Support:$2.98, $2.84
Major Resistance: $3.318, $3.361-$3.370, $3.423, $3.516

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Third Time Not the Charm

Daily Continuation

For the third time in the last three days, prices broke above the old gap (discussed for the last few days) only to find selling and closing the day below the lower end of the gap. Clearly, there is formidable resistance around the high side of the gap ($3.047 original gap to $3.091 yesterday’s high). Perhaps, they will be more successful on the expiration of the November contract tomorrow but regardless, the Dec contract is likely to test this or nearby support in the coming weeks.

Major Support: $2.907, $2.822, $2.71,$2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.783, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.091-$3.101, $3.19

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Another Attempt

Daily Continuous

Yet another attempt to close above the gap and confirm the action with a close above was met with failure. Perhaps that will happen during the expiration but continue to expect a challenge of either the gap area ($3.08 now) with the Dec contract (whether it is closed above that area as Nov expires) as it takes over as prompt.

Major Support: $2.822, $2.71,$2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.783, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.101, $3.19

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A Reversal Towards the End of the Week

Daily Continuous

Last week provided a great opportunity to learn about gaps as I discussed in the Weekly Section on Wednesday… It is important to realize that the gap closes, but it is critical that the market confirm that by a daily close beyond and even more important, from an enforcement standpoint, to have a weekly close beyond the gap. Neither occurred last week and we witnessed the market reject the gap closing as the week went on. I want to thank the folks who sent me emails regarding the accuracy of the Weekly update and hope it was a profitable event.

Added to the discussion about the market going into expiration and how the market looks like from a technical standpoint in the Weekly section and will not restate what is already written. Prices have three days left of the November contract and there is still 21,000 contracts open (historically a little high) so there may be some additional volatility. My interpretation of the market remains the same as stated in the Weekly last week– expect the Dec contract to weaken toward the gap area ($3.066) in the coming week. Where Nov goes is anyone’s guess- it may chase Dec but I have to believe there are some option positions around $3.00 that may or may not have been closed last week, ensuring the potential volatility.

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Expectations Being Met

Weekly Continuation

As discussed in the Daily and the Mid Week updates, closing that gap from ’19 was important and unexpected during the Nov tenure as prompt. Had a stronger indication that the gap would be traded above when the Dec contract takes over this coming Thursday (thereby gaping above the old gap), followed by the Dec prompt retracing and actually filling the gap. All of those expectations were thrown out as Nov closed gap on a Daily basis, but could not confirm the legitimacy of the strength buy closing the week above the gap. Instead, prices weakened and closed the week below the gap area (seen below).

The Gap in Daily Continuous – Back to 2019

Technical behavior interprets higher weekly closes and breakouts through well – defined resistance (held the market since 2019) are bullish indications that a market intends to continue higher. Unfortunately, the breakout to a new high was not supported in the immediate or differed contracts, November was the only contract of the next nine to record a weekly gain. A highlighted earlier, technical orthodoxy requires confirmation, perhaps it runs a little more during the three expiration, but I would expect December to continue to weaken as highlighted last week. 

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Now What Happens

The market continued higher during the trade day only to weaken towards the end and close the day at the low side of the gap range. Mentioned earlier in the week, play the range and keep the stops tight. Need to see how this plays out today– may make several technical event today.

Major Support: $2.983, $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.101, $3.207

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Gap in Daily Closes – Meaning

2 Year Daily Continuation
Weekly Continuation

I did not think that the gap in the Daily Chart would be filled during November trade (pink line above), but like other events I am wrong. There was never a doubt that the gap would be filled (that’s because Dec was trading north of the gap at $3.34), but filling it with November has some implications. As mentioned in the Daily, the fact the gap was closed is important but prices did not close the day above that gap ($3.047), which leaves it unconfirmed. More importantly, when the market closes above (the Nov or Dec contract) the level around $3.00-$3.04 it will then become support (what was resistance becomes support) for a potential extended period of time. That said, should Nov remain above this area, expect Dec to at least test the zone during its tenure. The longer the zone remains support it may be the base for a period of weeks.

This rally has been based on some sort of fundamental driver and should that driver be mitigated then prices may trade around this area or below for a few sessions and possibly into and through expiration. If the driver remains and this area become support then its a new world for the near term and you have to look at higher prices for resistance because a floor has been established.

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Gap is Closed in Early Trade – Not Confirmed at Close

Daily Continuous

Price surprised me as they closed the gap going back to 2019 that sets up a new world (see Weekly section). Key to remember that the market did not close the session above the gap (technical technicality) and therefore has to be questioned. Seems like a good area to sell with stops just above as a low risk area if you are so inclined, but be careful with Dec as it showed some strength but did not join Nov in a new high which brings a certain amount of doubt to the whole daily move.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.101, $3.207

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Prices Remain Firm

Daily Continuation

First off, I want to thank those that responded to my email yesterday. I know you are all busy but I wanted to get a sense of the technical knowledge of how important the gap, discussed yesterday, is to the NYMEX price for the next few weeks. Due to the responses, I will go into it’s importance in more detail on the weekend with the Weekly report. Until then, that gap remains significant resistance. Noticed that the gains were not met by the differed contracts as Dec came close to a new high, but fell short, while the spread between the prompt contract and differed narrowed. Trade the range but keep the stops close on selling this rally. Not sure if this rally has enough support to close the gap, but the varied participants participating in this commodity trade, give me pause.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.618, $2.508, $2.339
Major Resistance: $2.908-$2.928,$2.973-$3.00, $3.047