Author: Willis Bennett

Ya Think the Bias Is Bearish

Weekly Continuous

More often than not a price spike with a significant contribution from short covering is followed by a price vacuum once the buying that caused it is exhausted, and at least a retracement of the gain. A decline of $.794 (nearly 25% of price at last week’s close) would be considered outside the range of expectations of this analyst. Rather than opening higher after the three day weekend, February was immediately offered $.20/dt lower. There was no gap because of the wide daily ranges of last week’s rally, but the best February could do was a trade to $3.189 ($.124 below the previous Friday’s well – bid close-which turned out to be the high for the week. There was a short – lived bounce off the 50 – day SMA but nothing that resembled one at the trend line drawn from the December lows, which I had thought would guide success prompts higher. Nope- February fell unabated through multiple levels of conventional, moving average, trend line and moving average support. By the week’s amply offered close , prompt gas had returned to the band of weekly closing support ($2.469 – $2.548) that has limited every decline since the recovery from the June low.

While volume was lower during the decline last week — I guess you could consider it kind of a dubious positive technical factor. Although less than a week earlier turnover was higher than average. It also certainly appeared that surviving speculative short sellers returned with a vengeance…open interest for the three trading days between Tuesday and Thursday (open interest statistics lag one day) increased 28,363 contracts. Were just setting up for the next round.

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Slight Additional Weakness

Daily Continuous

After all the drama from the combined Monday/Tuesday trade the action and volatility slowed yesterday as the prices entered the comfortable range trade of the last few months. This behavior should likely continue for the next couple of trade days. Will be interesting to watch the next two storage reports have any impact on price action.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.694, $2.62, $2.47, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

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Tad Dramatic

Daily Continuous

That was a bit of drama going down when no one wants to buy– now we have a whole new market in the same old range that held the market in December. Lets see where this all leads us.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.62, $2.47, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

Strong Finish –Trouble Brewing

Weekly Continuous

February quickly retreated toward targeted support ($2.600 and $2.700). After trading the low of the week($2.694) February recovered and developed a dramatic bout of short covering spiking to a high of $3.392 with exceptional volume. Having already traded a range of $.698…the widest range for any two days since the beginning of the collapse from the December ’22 high, February traded within Tuesday’s range ($2.884 – $3.392) for the balance of the first full week of ’23, but again finished the week with a substantial bid. February posted its highest close since the first Friday of November, just short of the resistance presented by the lower boundary of a range the current prompt traded in from April through October which includes the gap left on the February chart on November 6th $3.635 – $3.681 and February’s 40 – week SMA…which it failed at twice before breaking down. On a continuation basis prompt gas closed just below a band of weekly closing resistance between $3.330 and $3.473 ). The daily continuation gap is $3.407 – $3.452 and two standard deviations above the 20 – week SMA is $3.462. That represents a whole lot of areas to bring sellers back, Unless the prompt can extend its rally…as another strong weekly close suggests it will, after posting the highest daily close since 11/03 ($3.515), it is in danger of a short – term momentum divergence…and in any event is extremely short – term overbought. Expect selling.

Something that caught my eye and so I checked previous years and it failed to turned up any other year that there was anything close to the premium over March at February has at expiration. So, the question becomes whether February gives up much of that premium over its last nine trading days or March begins to catch up. Based on my comments and foregoing analysis of resistance, extension nearly two standard deviations above the twenty week and the extreme short – term overbought condition expect that February retreats from a challenge of the October highs to redefine support while March and the Q2 months begin to find more sponsorship.

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Perhaps the Market Showed Too Much Strength

Daily Continuous

Go into last week’s trade and the results in the Weekly Section–From a daily perspective the market is confirming the lack of follow through in the light Monday trade as prices rejected any type of follow-through of the rally. One element discussed in the Weekly section is the historically extreme premium the Feb has to Mar. Check out the chart below and you will see that the extreme variance is starting to narrow.

February less March Contracts

Mentioned in the Daily last week that a source of the short covering was the Feb contracts being bought to cover the short — Then I mentioned that the short covering rally had a slight gain in open interest– the differential can’t confirm that the reason for the gain was those traders who were covering shorts “rolled” them into March but looking at the the breakout in the differential spread may be an indication. If you cover a short but roll it to the next month there is no change in open interest, but you have sold the next month — putting pressure on that contract. This will be interesting to trade in the coming week as March may gain to narrow the differential while Feb declines.

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Is It Going To Consolidate Gains?

Daily Continuous

Interesting day trade as prices firmed after open interest fell on Wednesday. It may be that the trade is starting to develop a more positive bias it will need some additional gains — however small– in the near term.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.62, $2.47, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

Suspected This

Daily Continuous

Want to apologize for any issues with yesterday’s Daily — (there was only one complaint) — but it reminds me to remind all of you that if you don’t have a Daily in your email — it maybe an email issue — so be sure to log in and check the website. Unless I am ill there should be a posting.

On to the market– once again a big short covering event ran out of steam there were no follow through buyers to build on the price. Not over yet as I noticed that total open interest had a small gain yesterday (according to the CME) while the February contract had significant declines in open interest. Perhaps the short covering was just rolling forward and selling a differed contract but covering the Feb exposure. Time will tell as the week wraps up.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.62, $2.47, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

THAT Is A Short-Covering Rally

Daily Continuous

The short covering started on Monday as open interest decreased as prices rose, but yesterday was the big run and I don’t have confirmation from the CME– but I expect a significant amount of short open interest left the market. It really means little to the trader as I am waiting to see gains in open interest as prices rally. We have witnessed these types of rallies in the last year only to have prices reverse back lower once the short were eliminated. From my perspective — thankfully, I had stops in just above the resistance area mentioned yesterday– so damage was minimal. Now I want to wait and see how much leg this rally can have.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.00, $2.87, $2.62, $2.47, $2.38-$2.26, $2.17
Major Resistance: $3.16, $3.48, $3.536, 3.59, $3.65

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Solid Short Cover Based Rebound

Daily Continuation

It is time to watch the rubber meet the road. The recent rally has been identified as the cold and extended cold coming, forcing some shorts to cover– but watching trade while watching the Championship game– I am witnessing some serious selling taking prices off the high $2.90’s. Have no idea as to the longer range forecasts and really care not. The market is at the high end of the resistance and will be looking at selling resistance.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.62, $2.47, $2.38-$2.26, $2.17
Major Resistance $2.786-$2.865, $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

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Break Above Resistance Continues

Daily Continuous

Prices broke above near term resistance and held strong through the end of the week. Due to the strength, I expect prices to remain firm today regardless of the late Sunday weakness showing the start of declines, regardless, the market is likely to remain range bound this coming week.

Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.47, $2.38-$2.26, $2.17
Major Resistance, $2.786-$2.865, $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

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