Author: Willis Bennett

September High for November Remains

Weekly Continuous

The high for November gas printed just over $3.00 in early September and while last week provided a marginal attempt to get back to that level, the rally failed reversing and closing near the lows (in fact after the regular session was finished the late afternoon traded much lower). The late declines took prices to close just about on the 10 week SMA. The week’s action occurred on lighter volume and declining open interest (highest volume on the declines).

Since prior to the beginning of November’s tenure as prompt it has presented a volatile trading range (basically +/-$2.40 – $2.90). Trade gave up the a significant portion of the substantial premium awarded at October expiration. Action then had November trading through its September low (and its 200 – day SMA) before regaining that SMA, and significantly more, when it traded to a higher continuation high at $2.955. This failure at both of the extremes suggests that the volatile range will continue through the remainder of the November contract. This price behavior will mimic other years when there has been such a significant premium.

Monthly Continuation

While the Nov contract has traded in a volatile range ($+.55) this month the differed contracts have not provided the same level of volatility. December traded within a +$.35 range since the expiration of the Oct contract and similar narrower ranges occurred in the other winter differed contracts. I will be going into the open interest and volume of the differed contracts during the week so be sure to check.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.618, $2.508, $2.339
Major Resistance: $2.789-$2.801,$2.908-$2.928,$2.973-$3.00

Late Night Declines Hold

Daily Continuous

The late night declines from Tuesday held all day which signals the weakness to the run early in the week. Prices now sit in the middle of the range developed after the Nov took over as prompt. Do you feel lucky? I have no idea what the storage report will look like – but the market has shown me no substantial support for the short covering rally (early in the week) extending into the future therefore I do not think the declines for the Nov are not over yet.

Major Support: $2.454, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.618, $2.508, $2.339
Major Resistance: $2.789-$2.801,$2.908-$2.928,$2.973-$3.00

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Prices Collapse During Late Night Trade

Daily Continuation

Had written the Daily after the close and was going to discuss an additional failure of prices at well defined resistance during the trade only to see a collapse of prices after the close when the market reopened. I can only suggest that whatever fundamental data hit the market on Sunday, was reversed late yesterday. It will be interesting to watch how the trade behaves when it has full market participation, the declines could continue to last Friday’s low $2.618 or does it find support near term.

Major Support: $2.454, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.618, $2.508, $2.339
Major Resistance: $2.789-$2.801,$2.908-$2.928,$2.973-$3.002

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After Close -Gap Closes

Daily Continuous

Discussed yesterday of potential for all of the excitement surrounding the opening on Sunday night (opening gap) to be mitigated during this week. The gap was closed during the early after close market — so now prices sit where they were at the highs on Friday. That price behavior is not a ringing endorsement for folks buying into November on expectations of additional price gains. That is not to say they can’t go higher, as any demand gains from forecasts will have a positive impact, but it looks like the idea regarding the short covering causing recent gains is accurate. This run just does not have the support from the total trading community yet — stay tuned.

Major Support: $2.454, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.74, $2.339
Major Resistance: $2.743, $2.789-$2.801,$2.908-$2.928,$2.973-$3.002

After Weak Start — Nov Firms

Weekly Continuous

When trading opened last week on a run and didn’t look back, rejecting the the $.369 decline of the week before and closing above the gap from last November. The market traded to the highest level since before the Nov ’19 highs but did not contain the technical indications supporting additional gains, instead they evidence shows that the rally was on short covering (more below) when prices eclipsed the 50 day SMA. Open interest in the prompt contract declined over 100,000 contracts (over 30% of total) which is significant this far before the expiration process and the fund rolling period.

Monthly Continuous

In previous discussions, there were four years when November commanded a large premium as October expired. Those four hears between ’04 and ’09 were afforded a premium between +/- $.62 and $1.47, this year’s was $.694. Each of these previous years there were some similarities to trade after the October expiration. 1) The expiration gap that resulted from the premium was reduced but the gap was not closed until the following year. The low, so far for Nov has not closed the gap from the Oct expiration; 2) the Q4/seasonal high had yet to be traded (the earliest was at the beginning of December’s tenure as prompt), this year’s has yet to be defined; and 3) November constructed a volatile trading range, The first two weeks have had above average true range.  Last week’s action left the Nov contract at a $.64 premium to October expiration where it started the month. The last week’s range continued the range expansion of the last four weeks ($.47+,$.525, $.769 and $.375) supporting the concept of entering a volatile trading range environment.

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Prices Explode on Sunday Night

Daily Continuation

Prices exploded in lighter trade on Sunday night, breaking above the near term resistance. Now the question is, do prices close some of the substantial gap that exists in the charts? Should it try, there may be low risk buying opportunities available. See the Weekly commentary for longer term impacts from the recent gains. This rally on Sunday may provide some opportunity for SHORT TERM SHORTs– but can’t stress the need for stops.

Major Support: $2.454, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.74, $2.339
Major Resistance: $2.743, $2.789-$2.801,$2.908-$2.928,$2.973-$3.002

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Action Edges Prices Higher

Daily Continuous

Initial results from the storage report were less than bullish but prices rallied slowly through the day and finished near the highs. The fundamental data shows a hurricane hitting the gulf and demand destruction coming. Not following the supply data, I have been told that the supply disruption has been basically offset by limits in LNG exports. So, not sure why some of the strength during the trade day.

Major Support: $2.376,$2.258-$2.253, $2.219
Minor Support: $2.316
Major Resistance: $ 2.693-$2.701, $2.723-$2.743, $2.781

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Little Change

Daily Continuous

Similar behavior yesterday as the run first thing in the morning started to challenge the resistance around $2.70 only to find consistent pressure for prices. It would seem that the market is determining whether the demand destruction and LNG restrictions due to the storm out weigh the loss of production. Until this struggle gets resolved, the recent range should be expected.

Major Support: $2.376,$2.258-$2.253, $2.219
Minor Support: $2.316
Major Resistance: $ 2.693-$2.701, $2.723-$2.743, $2.781

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The Range Re-enforces Resistance

Daily Continuous

The action yesterday tested the resistance at and around the $2.70 area and failed again for the second time this week. This area is now established as formidable resistance for the near term. From that failure at resistance, prices continue to melt down closing the day near the lows. The market seems to be setting a range for traders and expect that to continue until the fundamental data point settle themselves out.

Major Support: $2.376,$2.258-$2.253, $2.219
Minor Support: $2.316
Major Resistance: $ 2.693-$2.701, $2.723-$2.743, $2.781

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Short Covering Rally Sends Prices to Where They Began

Daily Continuous

I have been waiting for an indication of the market start to establish a base from which a Q4 rally (annually) could begin– yesterday was not such an event. Instead, it looked like a basic near term short covering rally as prices retreated after a certain high (very near the gap from Nov ’19 that was closed on the first day of Nov prompt), declining during the remainder of the day. Not sure what spooked the bears (I have been told tropical storms destroy demand more than hitting production). Most commodities rocked yesterday — so perhaps that led to some of the strength.

Major Support: $2.373,$2.258-$2.253, $2.219
Minor Support: $2.32
Major Resistance: $ 2.693-$2.701, $2.723-$2.743, $2.781

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