None of the technical indicators show the market is over sold except the Bollinger study that maintains the market is over 2 deviations beyond the 20 week SMA. This provides the short sellers to add to positions and as mentioned in the Weekly section, could send price another $.25 lower. Waiting until I see some divergence in the momentum indicators for starting any length.
Major Support:, $1.795-$1.766 Minor Support : Major Resistance $2.00, $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
March collapsed through and closed below support presented by the February – March – April ’23 lows. Friday’s close was the lowest since July ’20. March reversed from $2.127 and five straight lower closes I thought that prices would hold the support zones and form the construction of a trading range that would support a historically consistent Q2 rally. From that support there would be a annual Q2 rally which is still expected but the late winter/spring rally, will certainly commence from a lower price than expected, and likely be less than average (the ten years average is about 50%). You should also expect that the rally will be primarily be powered by short covering.
As mentioned last week, it does not get a lot more technically bearish than an “outside” month with a close below the previous month’s low with increasing volume. Before getting into a discussion of historical support, it is interesting that it took 41 weeks for prompt gas to trade from ‘23’s weekly closing low ($2.035) to the end of October weekly closing high (a gain of $1.438). It then took five weeks to fall from $3.473 to$2.469.
Stepping back a little from that more or less recent volatility, since the high trade on 10/30 ($3.630) prompt gas has fallen $1.813 or almost exactly 50% in fourteen weeks (normal cycle length). Over the last twenty years the average decline from Q4 highs to a Q1 (late winter/early spring low) is 41%, the ten years average is 44%, five years 48%.
Four years in June ’20 there was a suggestion to extend commitments as long as someone could be found to take the other side. That turned out ok. The key to technical analysis is to remain consistent…and to learn from history. Since the thoughts that the ’23 lows may and last week’s decline eliminated those thoughts, I am not willing to accept that we are yet approaching an analogous point. The trigger in June of ’20 was a reversal from a lower low which created multiple momentum divergences from a severely oversold condition (that’s the most common way for the market to communicate that it has traded to an unsustainable low). March gas is short – term oversold and the speculative short position is close to out of hand…total open interest is about the same as it was at the same time in ’20, before the bottom in June that total fell about 300,000, so don’t be surprised if there is short covering rally…which fails at a lower high, but the market is not that close to long – term oversold. For now, the target for prompt gas seems to indicate $1.50- $1.60.
Major Support:, $1.795-$1.766 Minor Support : Major Resistance $2.00, $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
After the break down extension occurs and now the bears are rolling in the market. Momentum indicators are not over sold, the only technical indicator is that prices are well below the 2 standard deviations from the 20 week SMA. We all know that is not a definitive conclusion of a directional change coming immediately but likely in the near future. I am flat so lets get this ball rolling downward kids– how low do we go???
Major Support:, $1.991-$1.96, $1.795-$1.766 Minor Support : Major Resistance $2.00, $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
After the attempts we finally got a break down under $2.00 yesterday, but unlike short covering rallies there was little length liquidation on the break down. So now what — I always remember another trader who years ago mentioned to that finally breaking support (or resistance) is like the dog who loves to chase cars– barking, growling only to catch up with the car when it slowed down and the dog has no clue what to do. Lets see if the dogs (bears) can deal with their success.
Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766 Minor Support : Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
I am reminded of a tune where the lyrics say “workin hard for the money….” That defines the gas trade of recent — the bears want that breakdown so bad– to see what lies below. As mentioned in the Weekly section there is this type of support well into the mid $1.90’s and then just below that for another $.15. Perhaps they believe that the fundamentals warrant prices down to a multi decade low below $1.40. That is why there are markets — representing differing views and speculation. I am looking for technical divergences.
Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766 Minor Support : Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
Just to confirm what a nerd I am with this market — I have decided to watch the market in 5 minute increments for a change. Yesterday, trade came in selling for the until about 8 am Central time then spent the next few hours consolidating before building a small rally into expiration. Why do you ask why I bring this up– this consolidation type trading is extremely boring for this trader so I just to look for anything that can give me a directional bias. Not so yesterday. Play the range discussed in the Daily yesterday and if I wake up early enough tomorrow I will proved some key technical details — if i don’t (may go skiing) well you know what to do.
Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766 Minor Support : Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
The February tried to rally but failed at declining resistance, reversed from that lower high, again, and faded into expiration. Settlement at $2.490 was $.131 less than January and $.247 less than the average monthly settlement during ’23. New prompt March, which was offered at a $.443 discount when Feb went off the board was left to set the important January low at $2.037 on the last trading day of the month. The “expiration” gap accounted for the first ever “outside” January (prompt gas traded through both the calendar December high and low). It does not get a lot more technically bearish than an “outside” month with a close below the previous month’s low with increasing volume. 9,899,538 contracts changed hands during December, 12,006,048 during January. It is interesting that the last time that much volume traded during a calendar month was February and March of ’20, when both month’s volumes were slightly higher as prompt gas began to construct a multi – year low. Despite trading within a narrow range (an average of $.102/day vs a 15 day ATR of $.264) March managed to trade two “outside” days. Back to back “outside” reversal days are rare and suggest market uncertainty. The new prompt ended the week by recovering from the lowest low traded since April 14th ($2.021).
March, is sitting right on top of serious conventional support…four consecutive monthly lows from February through May ’23 ($1.967, $1.944, $1.946 and $2.031). Unless March can get through all that support in a hurry it has the serious chance of drawing out speculators to challenge the resistance levels due to the markets inability to break lower. This may trigger another round of short – covering.
Not much to say about the technical side of trade — with the exception that $2.00 and just above seems to be finding some buyer. Went into the expectations in the Weekly should that break earlier, so hold on and see what happens (or sell some premium in the options market).
Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766 Minor Support : Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
Nothing more than previously discussed from a technical standpoint, with major support zones just below trade. With the upcoming storage report, perhaps the bears are looking for a flashpoint to add to the shorts.
Major Support:, $2.00, $1.991-$1.96, $1.795-$1.766 Minor Support : Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65
