March went out quietly as expected and now we enter May as a prompt month. Will be expanding on historical tendencies of the May contract later in the week– but for now it seems that it will go back to where April left off. Play the range from last month for now– I think some interesting information will be developed when we get to the May nominations in the physical world.
The lower low last week ($1.519) on the open of the trade on Sunday night was quickly replaced by subtle strength. The impacts from the virus may have short term expectations of demand destruction ( though not being a fundamental trader- I don’t care) are now being offset with serious implications of production issues from the declining crude price. Looking at the chart above – some folks supported the April contract into expiration which is contrary to the fundamental trade. It is likely that prices will decline to close the small differential from last weeks contract expiration (the lowest since Sept ’95) and the close of the May contract- from there the market will be fun to watch. Also, watch the nominations and flow data early in the month as any hedges from the winter are gone and if folks hedged they may not choose to show up with their gas in this price environment. The three month range remains the trade game.
I remain on the sideline for the fundamental arguments of whether prices are headed up due to oil price issues impact and the virus blues. All I can see in the technical data is that the price continues to have problems at major support and the fact prices are trending into 25 year lows suggests to me that things will change. Unfortunately for nat gas traders, those changes can be violent. Longer term, the weakness in the summer strip was met with strength in the winter strip — while speculative shorts declined. The market may be sending a strong signal for the upcoming summer.
Major Support: $1.611, $1.555, $1.481
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
Commodity Futures Trading Commission
Natural Gas Managed Money Long (red) vs Managed Money Short (purple) positions
Additional short covering occurred last week but what was of interest to me, was the gains in the winter strip while the summer strip found just minimal support. The market is showing a slight change in long term bias with this action. Time will only tell, but it is beginning to look like the bears are becoming a little spooked and loosing impact.
Not much to say with the upcoming expiration as price action is low on volatility. Obvious to work on May contract and depending on how April expires — play that momentum direction — whether to the low or high end of the range.
Major Support: $1.611, $1.555–$1.519
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
We have two days left in the April Contract and so far the process has been quiet– though I see no reason for any volatility. Not much to see here in gas except range and prices now are closer to the low end of the range.
Major Support: $1.611, $1.555–$1.519
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
Major Support: $1.611, $1.555–$1519
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
Not sure why prices went up yesterday after last week’s close on weakness- would still expect some weakness early in the expiration process. Roll to the range as it is like to rule the next months trade.
The bears are growling along now as prices closed the week below the long held support for the last few years. Having heard from many of them over the weeks it will be fun to watch the outcome. Technically, good luck and pick a number — any number — I am buying length in certain increments after playing the range for the last three months.
The trade last week left serious implications for future prices as the close near or below the long held (10+ year lows) will have longer impacts both up and down. The weakness is related (so I hear) to the effects of the virus and with the additional declines in crude oil prices. That tells me that declines due to the illness, there is less gas is used to keep homeowners warm than buildings which, not occupied, still need heat (avoiding frozen pipes) and therefore demand goes down. Seriously, you fundamental guys are twisted. Not sure where this goes down to but it will continue until this irrational perspective is concluded.
All fundamental noise to me, as I look at the markets, is the interpretation of the virus and the oil war that has commenced. The price action does not blend with the potential of the producer cutting production in the upcoming weeks and the effects of the coming summer that will start occurring. Technically, there is no support down to lows from the mid to early 1990’s so good luck picking those bottoms.
Major Support: $1.611, $1.555
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
Commodity Futures Trading Commission
Natural Gas Managed Money Long (red) vs Managed Money Short (purple) positions
A serious reduction of the short position from the speculative crowd occurred from March 10th to the 17th and is reflective of the chart above. It should not be construed as the potential for a short covering rally being abated but rather the short speculative sector is reaching the conclusion that significant additional declines is now limited.
Have been issuing suggestions of playing the range for the last two months and the range has remained between $1.61ish and $2.00ish. That has remained a profitable 20+% range with which to derive revenues if you are a trader. Some fundamental folks don’t understand that trading is different than “a low versus a top”. The bell is not going to ring when the low occurs and everyone jumps in. As discussed on the pay site, this is not likely to be a violent reversal to a bull market, but rather one of tests and steps. Until the break out occurs, play the range.
Major Support: $1.611
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
Prices were down, as with all commodities, but the declines in gas were muted as the support displayed last week continues. Continue to play the range for the near term.
The two charts above are provided to show the damage to the bearish market last week. Natural gas has a history of announcing a change in directional trade with a weekly reversal, accompanied with large volume. That is what happened last week as prices traded a lower low than the previous week and tested the lows from previous years (mentioned in previous postings) at $1.61. From there prices reversed in a large way on Monday and Tuesday (importance of Monday and Tuesday below in CFTC analysis) and traded to a higher high than the previous week on extraordinary volume. Prices closed the week at a higher close than the previous week which confirms a bullish outside week reversal. This is teh second strong signal that prices are in the process of completing a bottom to the trade and long term technical support.
Major Support: $1.611
Major Resistance: $1.99, $2.029, $2.08-$2.10, $2.34, $2.437, $2.48-$2.52,
Minor Resistance: $1.883,
As explained last week –Prices have retraced precisely to support in the Monthly chart above. The average gain from Q1 lows to Q2 highs is nearly 40% over the last ten years. Last year’s run was well below the average, with just a paltry 8% gain. These 2nd quarter gains in price have occurred in various stages of fundamental supply and demand imbalance levels – highlighting the supply situation of this winter may provide a muted impact this year, though the short interest by the speculators may keep this year’s rally well within the historical averages. The potential break-out areas for any rally will be the area of failure last months and the lows from August ’19 which held support from August to January. The lows tested last week at many annual lows seems to confirm long term support.
Commodity Futures Trading Commission
Natural Gas Managed Money Long (red) vs Managed Money Short (purple) positions
The chart above indicates the historical extreme short position and some of the short covering that has commenced and actions last week confirmed the volatility the short covering will provide. Mentioned above that after prices sold down to $1.61 they rebounded and rallied for the next two days. That rally reduced the speculative short position, nearly 50,000 contracts according to the CFTC report released last Friday showing positions as of Tuesday the 10th. That short covering took volume over 878,000 contracts on Monday and and additional 1,039,000 contracts on Tuesday as prices rallied up to $1.95. This represents a somewhat muted short covering rally as discussed in previous weeks– but make no mistake the karma of this market is changing and it only a matter of time until the bias cracks.