Author: Willis Bennett

Is It the Q3 Low

Weekly Continuation

Failure at the conventional and trend line resistance on Monday and again early Tuesday (20 Week SMA) put August on the same track as its predecessor contract months which (as discussed in the Daily) a low volume decline into expiration. With one day left for prompt August before it goes to settlement, technically it does not matter what happens tomorrow unless there is some kind of high volume price surge (regardless of early Sunday night trade). Given that Friday’s close was the lowest daily close since May 1st and the lowest weekly close since prompt May settled at $1.619 on Friday April 26th, the chances of another “amply offered” expiration seem greater.

The bottom line is that prompt gas held a zone of support defined by the March high ($2.009), the mid – April high ($1.943, the high of week ending 04/12) and $1.913, the low of calendar May, as trading for the last week of August’s tenure ended, tenuously. For the first time since just after the “expiration” gap following May going off the board, prompt gas traded sub – $2…to $1.994, and September ain’t far behind ($.045 premium to August).

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Can’t Argue With Another Weekly Low Close

Daily Continuous

As the predecessors before it this year, the August contract was amply offer into the close last week and traded below $2.00 for the first time since last spring. Go into expectations in the Weekly section, so I will not repeat here. Suffice to say that the lower weekly close is a bearish indicator and none of my momentum indicators show the market as oversold (though approaching) so an am;y offered expiration should still be in the cards — though late Sunday trade has the market firming.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

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Storage Pressures Further

Daily Continuous

Don’t think I am going out on a limb here but I think the August contract is going to follow the previous contracts by being well-offered into expiration. What is getting more interesting is the Winter ’25 summer ’25 spreads during this decline.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

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Testing, Testing and Testing

Daily Continuous

Last Week’s lows continue to provide the near term support for the declines to help establish the low end of the range. This range should hold the majority of trade for the upcoming few weeks. Spread traders may want to look at some of the winter 2024/5 trades in the coming weeks as the low end of the range occurs.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

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Finding Support

Daily Consolidation

Not sure how long this run will last, but it is good to see some rebound (as discussed in the Weekly). It may just be providing trade a new place to short or it may be gradually starting to run in small steps.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

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Some Slight Consolidation

Daily Consolidation

Declines slowed and consolidation at the lows of last week provided the market a chance to take a breath from the oversold RSI at the lows. Higher volumes on the declines and gaining open interest during the declines suggest that the market is expecting additional extensions lower.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

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Decision Coming To Gas

Weekly Continuous

Some expectations that proved correct was that if August traded through its February low ($2.207) the next support level would be the zone between the March and April highs ($2.009 – $2.092, the January low, $2.037, is also within that zone). It did not take long. Each day’s decline was supported by increasing volume and open interest as August began the test of the same zone that was repeatedly tested during the early spring of ’23 (and had failed to hold during a similar time frame earlier this year). Before a modest recovery, the highest volume since the June high accompanied the lowest trade since May 3rd, and the lowest close since May 2nd.

Clearly, the gas market is in the grips of its traditional Q3 decline (which has carried further faster than suggested here). From the June high prompts July then August have fallen as much as $1.144 from the June 11th Q2 ’24 high (36.2%). Friday’s close was almost exactly 61.8% (Fibonacci) retracement of the rally from the March low to the June high and a prompt contract was back below the 20 – week SMA for the first time since May expiration. From the “expiration” gap that followed May expiration…when the rally really began, to the June high took seven weeks. Over the last six weeks prompt gas has erased all but about a dime of that rally, and the gap is still open between $1.848 – $1.913.

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Further Collapse

Daily Continuation

What timing the market continues the declines and I found internet service for a while. A big target on conventional support presented by the highs of calendar March and April ($2.009 –$2.092) and then the “expiration” gap left after May gas went off the board ($1.848 –$1.913, ). My thoughts (as suggested the other day) were that those targets will remain untested until later in Q3 (sometime around the annual Labor Day lows) but not right now. It may prove noteworthy that September traded a lower low while it was losing the little bit of premium that had been awarded over August. I still believe (though feeling lonely) that still expect a July rally from a post – Independence Day low.

Major Support:, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.44-$$2.502, $2.618, $3.00, $3.16

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Declines May Form the Q3 Low

Daily Continuous

Was expecting the annual Q3 low to occur either side of Labor Day but the way this market is behaving — it may happen in July. Will have to look into how many times that has happened while traveling this week. Headed to Montana and the cell / internet service will be spotty until next Tuesday. We all need a week off and I will be enjoying mine. Will check in when available — in the mean time — sell premium and should the market reverse (expected) will be highlighting it if possible.

Major Support:, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.26, $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.44-$$2.502, $2.618, $3.00, $3.16

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Still Trying To Define Low End of Range

Daily Continuous

Still trying to have the market confirm the low end of the new trading range. The declines do not confirm the support areas by significant divergences, and prices meander around, looking for a boost up or down. Seems like a great time to sell premium in the options market.

Major Support:, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.41-$2.31, $2.26, $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.44-$$2.502, $2.618, $3.00, $3.16

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