Author: Willis Bennett

Historical Expectations Carry Trade

Weekly Continuous

Pre/post Memorial Day price weakness nearly always leads to an early June low followed by one of the most historically consistent rallies during the calendar year. Last week’s declines (expanding the Holiday weakness) was on schedule. Now the question is does the historically reliable seasonal tendency during the early summer of that weakness into June expiration lead to a recovery rally by the July contract in place. Prompt July has traded through the calendar May high in each of the last three years.

Given the high volume weekly reversal just traded week before last expect, June weakened further into expiration…the last four expiring contracts have done so, confirming the recent trend. Given the premium currently awarded to the July contract last week suggests further extension of the Q2 rally. After a “correction”/end of seasonal weakness, expect an historically consistent seasonal rally. The 10 – years average of those rallies is about 17%

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

Does History Rhyme

Daily Continuous

Prompt gas followed history, drifting south after the holiday and closed the week lower after the expiring June contract extended the weakness associated with expiration’s of late. Now, does the rhyme continue with a rally in the July contract. Strength this week will lead to that potential– early trade Sunday night is showing some support off of tests of support.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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

Expiration Tests Break Out Level

Daily Continuous

The expiration took the prompt June down to the key breakout level from earlier in the month around $2.45. July was afforded a premium of a little over $.20 during the process — which will likely lead to weakness as July takes over as prompt.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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

Expiration May Have Strong Range

Daily Continuous

Early weakness tests near term support only to spend most of the day rebounding. Discussed over the last few months — expiration is not likely to follow any technical interpretations– rather follow who is left and are they long or short. That can lead to wild price range trade– I prefer hanging to the side.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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

Test of Trend Line — Reversal

Weekly Continuous

Prices rallied last week up to the declining trend line off of the late October high (Nov expiration) and the early Jan ’24 high, before running out of buyers. The Memorial Day weakness that has been recently discussed showed up after a strong close the previous week June opened a little higher and stretched the rally to $2.756. Following a little weakness the prompt traded a high volume reversal to the upside on Wednesday with the most contracts traded in a day since 02/21, and closed at $2.798, the highest daily close since 01/17. June’s close was its second highest this year (v $2.808 on 01/09). The pre – holiday price pressure showed up the next day. June traded into a band of resistance between a couple of mid – late January daily reversal highs (and the aforementioned trend line), where the soon to expire prompt printed what is the odds on favorite for the May high at $2.924 and reversed lower with even more volume. Follow through weakness on Friday left June $.404 off its high just a day earlier…and a high volume reversal on the weekly chart.

High volume weekly reversals have long been the gas market’s favorite method of communicating that it has traded to and failed at a significant, unsustainable (at least temporarily) high. Reversal or not, exceptionally high volume weeks are almost always noteworthy events in the natural gas market. For example, the last three times that more than three million contracts were traded were:

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

Prices Reverse After Failed Rally

Daily Continuous

Discuss the effect of the Weekly reversal last week in the Weekly area — but a reversal is a reversal and should be respected as such. You know my attitude about the expiration process and not trading the prompt but focusing on next month and with the $.25 premium placed on July it would seem to be a reasonable time to evaluate the possible seasonal weakness into July’s early tenure before getting too aggressive.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.46, $2.67, $2.844

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

Extension Runs Out of Buyers

Daily Continuous

Price action tried to extend the recent run and did on a closing basis, but after the close the declines started in the after-market. Not sure where all this is headed as I discussed expectations into the expiration process in the Weekly section of the website and some have already been met. Be cautious in adding length into the long week end with the history of weakness around the holiday. Taking a long weekend this week so there will be no Daily on Friday and hope everyone has a wonderful weekend.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.46, $2.67, $2.844

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

Recent Run Cools

Daily Continuous with RSI

Was expecting a correction from the recent run per my comments in the Daily yesterday, not sure it is complete especially with the storage report coming in a couple of days, but it may extend down to the $2.51ish area before it is done. That type of decline will moderate the daily RSI and the weekly RSI– key element to watch is volume should the declines continue.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.46, $2.67, $2.844

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

Market Gains Continue– Overbought Levels

Daily Continuous with RSI

As most of you know, one of the tools I use to judge the condition of the market is the Relative Strength Index (RSI) a “momentum” indicator. When the calculation climbs above 80 (currently calculation is over 87), the market is characterized as being in the extreme over bought area. Looking at the chart above –notice that when the market hit the extreme zone in Oct ’23 and Jan ’24 there was a correction lower in the near term. Expect similar behavior with this current situation. The historical weakness around the holiday and the expiration coming — it would be prudent to expect a slight correction.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.46, $2.67, $2.844

Price Action Closes Above Key Averages

Weekly Continuous

For several weeks the possibility/likelihood of a short covering rally similar to the December/early January rally has been discussed here. This past week’s trade is what a short covering rally looks like. The surprise was that open interest actually increased from Thursday through Thursday (remember that reporting of open interest statistics lags one day). Remember that when a contract is bought to “cover” one previously sold short open interest is reduced by one contract. Rather than falling, the total increased by 519 contracts and if the exchange’s estimate for Friday is anywhere accurate that total was reduced by 287 contracts…an addition of 232 contracts over six trading days when prompt gas gained $.325 on a daily closing basis. This would lead to the logical conclusion that at least an equal number of new contracts were bought to those bought to cover an existing short position…that combination of buying pushed the bid steadily higher, and is when all is said and done, a technical positive.

From its contract low on 04/15 $1.907, June gas has rallied .747 or 39%. The rally from mid – April through Friday’s close is the largest increase in a prompt June contract of the last ten years, but only slightly larger than the ’23 rally ($.654, 32.2%) that peaked at $2.685 on 05/19. As surprising as the extent of the rally from the May low may be, it is still not all that different from a year ago.

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