Author: Willis Bennett

Nov Comes Down More Then Oct

Daily Continuous

For the first time in a while the differed contracts lost significantly to the prompt and brought some reality to the recent price action. Perhaps this is the first step in the correction bringing prompt closer to the second month, yesterday brought the Nov contract back after trading to an $.85 premium. Unfortunately, if you look at the Dec / Nov spread– it too is at an extreme wide margin. Mentioned yesterday, the prompt Oct contract is a “no touch” depending on your risk profile— perhaps the Nov contract brings opportunity (short term) from the bear side.

October / November Spread

Major Support: $1.864-$1.852, $1.768-$1.70
Minor Support:
Major Resistance: $ 2.162-$2.18, $2.275
Minor Resistance:$1.964-$2.008

Forget Support From Moving Averages

Daily Continuation

Suggested yesterday, that all of the support zones from the several moving averages around $1.97 would likely limit declines. That did not work out well yesterday. The spread to November widened so this expiration is up for grabs and gamblers. Expiration could be a washout like July expiration, or could rally on some late short covering and head back to $2.15– Unfortunately, technical data points don’t limit the potential.

Major Support: $1.864-$1.852, $1.768-$1.70
Minor Support:
Major Resistance: $ 2.162-$2.18, $2.275
Minor Resistance:$1.964-$2.008

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

New Week, Old Market — Expect Tests of Support

Daily Continuous

The breakdown to the 200 day (several other moving averages- see Weekly section) has created a regression to the mean and now expect another probe down (or two) but there are several support areas provided by the moving averages that should limit further declines. Discussed the expansion of premium afforded the November contract in the Weekly section. Expect the October contract to recover some of the losses from last week during trade this week. After the October contract expires, November may well feel some of the pressure that October endured last week.

Major Support: $1.974, $1.944-$1.924
Minor Support: $1.864
Major Resistance: $ 2.162-$2.18, $2.275
Minor Resistance:$2.37

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Prices Return to the Mean

Weekly Continuation

Price action in commodities usually have a regression to the mean after spending an extended period of time at extremes. Trading greater than 2 standard deviations above the 20 week SMA for five consecutive weeks is trading at an extreme. While there was a relaxation of that extreme the week before last, the market was due for a regression at some juncture. Last week, the regression took prices back to the 200 day SMA, the 40 week and the 20 week SMA before finding support.

Monthly Continuation

Currently, the market remains within the extremes from the August price behavior. With all of the moving averages poised in a tight range (a nickel range) just below, an additional break down like last week seems unlikely.

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

The Summer Bullishness Has Officially Joined Elvis

Daily Continuous
Spot October Contract

When discussing buying positions at support levels, I mentioned keeping stops near as there were some near term stop areas limiting your risk. Yesterday’s action showed why I recommended such. Had no clue that prices were going down $.28 but there was nothing to show why the support zones should hold on this test. In fact, when the breakout occurred in early August, there was not a lot of zones that the breakout retested. Looking at the Spot October contract, you will see the similarities of the break out with yesterday’s breakdown. Going back to that breakout I think that Elvis has left the summer building.

Now what– in the late afternoon trade on Thursday- prices went down and tested the support trend line from the July and August lows before rebounding. We may see some limited knee jerk rally off of the selloff but I am still more interested in the differential to the November contract which expanded back over $.50 yesterday. There are opportunities in the winter contracts as the market defines its winter bias.

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Storm Brings No Movement

Daily Continuous

As mentioned yesterday, the Sunday gain failed to send prices further up when everyone returned to the office. Prices declined through the trade day on Monday, while yesterday’s action returned prices back where the trade lingered most of Monday. The market seems to be in need of information on the production declines and demand declines (incl. LNG) associated with Sally. My experience has been to keep stops tight during these types of information events.

Major Support: $2.28-$2.26, $2.18, $2.162,$2.089-$2.055
Minor Support: $2.195, $2.102, $1.975
Major Resistance: $ $2.49-$2.51, $2.56
Minor Resistance:$2.37, $2.405, $2.443

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Sunday’s Run Hits a Wall

Daily Continuation

Prices started strong on Sunday as the market opened, continued to rally (up $2.399) but then melted down during the trade day, closing near the lows. Not the confirming signal for additional gains bulls may have wanted. Today, prices should extend the trend from the closing action of yesterday. How far the declines may take prices is unknown as the support zones (numerous) commence just below last Friday’s lows.

Big Move on Sunday

Daily Continuous

Prices started Sunday night up a nickel on some issue. This seems like more than a bounce off of the 50% retracement last week at $2.26, but time will tell. Significant support areas below last week’s Friday close, that the market will have to navigate through. Rallies will just retrace upward through the losses from last week.

Major Support: $2.28-$2.26, $2.18, $2.162,$2.089-$2.055
Minor Support: $2.195, $2.102, $1.975
Major Resistance: $ $2.49-$2.51, $2.56
Minor Resistance:$2.37, $2.405, $2.443

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Prices Retrace on Cue

Weekly Continuation

Suggesting for the last couple of weeks, that prices need to retrace the gains since the beginning of August. The last two weeks have eliminated the over bought status driven by the momentum indicators. The Fibonacci retracement went just down to the 50% support zone (from the lows in late July to the highs last week) see Chart below.

Fibonacci Analysis from late July Lows to Recent Highs

The declines are in-line with the the historical averages for declines from either side of the holiday. Now, the market will need to wade through the sentiment associated with the late year rally (occasionally concurrent with forecasts). Heard some whining during August, from many folks arguing against the well bid market when storage inventories are clearly going to be over 4 TCF. This is a fundamental concept that I ignore, but I remembered a few years ago when they ended over this level so I thought I would go back and look at what happened to prices. In 2016, prices rallied strong in October to correct some of the gains in early November then was well bid well into the winter. In 2015, after coming off declines most of the summer and fall— prices collapsed with a slight rally early in Dec. before resuming the declines, setting the stage for a multi-year low in March ’16. So there are two potential outcomes regardless of ending at 4 TCF, looking at history– yet another example of the value of technical analysis.

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Great Consolidation Pattern

Daily Continuation

Suggested at the beginning of the week was the potential for the market going to “rhyme” with its history, or continue to run beyond reasonable technical areas. My belief was that the market would succumb to the historical weakness surrounding Labor Day and that is what has occurred. In the last eight years (2020 included) the Labor Day low has occurred sometime by the 10th of September. The seasonal trend continues– the bigger question now is does the market extend lower or start to recover. Needless to mention- the over bought conditions have been mitigated. Still surprised at the expanded spreads in the Oct vs any of winter months– one my highly respected physical traders was as puzzled as I remain. Discussed earlier in the week– one position has to change — either Oct chases Nov, Nov has to decline to Oct, or the market stays keeps the spread extended and the correction will occur after Nov takes over as prompt. Keep those choices in the back of your trading mind.

Major Support: $2.28, $2.186, $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $2.255, $2.195, $2.102, $1.975
Major Resistance: $2.743-$2.755, $2.809 Minor Resistance: $2.37, $2.49-$2.51, $2.56

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.