Go into the changes starting to develop in the market in the Weekly but for the Daily trade I would suggest to continue trading the range that has developed in the October chart and the Continuous. The range was expanded slightly on the high side last week but continues to hold on declines.
Major Support:, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605
Minor Support : $1.856,$1.89-$1.856
Major Resistance:$2.18, $2.25-$2.310, $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16
Twice during the holiday shortened week expected post – Labor Day seasonal pressure appeared to begin to weigh on the prompt, both times (Tuesday and Thursday) October traded an “outside” day reversal higher with increasing volume. This suggests that weakness was being aggressively bought. Before the end of the trading week October was testing the calendar August high ($2.301). That high along with a late July high ($2.270) defined the upper boundary of a daily trading range that has confined successive prompts since mid – July and testing its own 50 – day SMA (currently $2.298 and falling). The close was $.148 above October’s pre – holiday close and less that $.02 below the week’s high the highest weekly close since 07/12 (the fifth of eight down weeks following the June Q2).
As previously discussed, prompt gas has traditionally felt seasonal pressure following the holiday but there is no special magic about the next few days after Labor Day. While sellers are usually in control, price strength has occasionally suggested that the late summer price negative seasonal tendency has already been satisfied.
With that said, while they are not all that common there have been a few years when prompt gas rallied through Labor Day only to trade a mid – month high and then forfeit those “counter seasonal” gains. ’19 and ’21 are the most recent examples. In the former prompt October rallied hard after trading through the August high…peaked at 2.700 on 9/17 then declined through expiration. In ’21 the rally high was on 09/15 at 5.650. Over the next five days the prompt gave up nearly a dollar before finding support.
Mentioned for the last few weeks three challenges for the gas market have been discussed. One of those challenges is unique to the downtrend from the January high and the construction of both the Q1/Q2 and Q3 trading ranges; the other two are long – term historically consistent seasonal’s. Two of the three have been satisfied with the average/above average declines from the Q2 high and then from a mid/late August high. The leaves only the tendency of expiring contracts to decline as their tenures as prompt near an end. As written here multiple times, failure of an expiring contract to be “amply offered” into expiration will be an indication that the character of the gas market is changing/has changed and will be a strong signal that higher prices are on the way. IF the traditional rally toward a Q4/Q1 high began with September’s expiration decline to test the July low, October will pass that test. Keep that thought in the back of your mind over the coming weeks.
The consensus of technical indicators improved a little last week and built on that improvement during the previous week. Support from improving market internals (volume and open interest), daily and weekly closes over several moving averages along with the daily closing momentum divergence mentioned last week (the daily RSI, a VERY sensitive “leading” indicator that never confirmed the July expiration lower low) left the consensus neutral for the first time since indicator deterioration began before the early June Q2 high .
Major Support:, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605
Minor Support : $1.856,$1.89-$1.856
Major Resistance:$2.18, $2.25-$2.310, $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16
Prices rices bounced from a test of support — but are now heading into serious initial resistance areas so be patient for the trade. The past couple of weeks have started strong only to wither during the week. Let the market define its upcoming directional bias before reacting in a strong way.
Major Support:, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605
Minor Support : $1.856,$1.89-$1.856
Major Resistance:$2.18, $2.25-$2.310, $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16
Discussed last week that weakness into the expiration was to be expected and now we have an expiration that the previous monthly expiration’s in 2024 have showed. There is nothing in the market that will prevent the trend from continuing. The more important question will be how much further the declines will occur. Still traveling but will be back after the holiday. n back – to – back weeks prompt September tried and failed to trade through convention resistance between +/- $2.250 and $2.300 and a confluence of declining moving averages…reversing lower after both attempts.
The continuation 10, 20 and 40 weeks SMAs are all declining and currently between$2.238 and $2.274, the high for the week was $2.278. Last week those averages were between $2.262 and $2.324, the high was $2.301. The weekly moving averages of the individual contract months are for the most part substantially higher…although the 10 – week of September is now $2.261.
Based on technical evidence provided by trade of the last two weeks the continuation moving averages are likely to continue to present declining resistance and guide the prompt and successor prompts lower until either the sponsorship develops to overcome the selling that will be coordinated with them or there is an “expiration” gap and weekly close higher…when they will likely act as support. Currently November with .555 premium over the soon to expire prompt, is the leading candidate.
Following the June Q2 high prompt gas closed lower for eight straight weeks (from weeks ending 06/14 through 08/02, For the last seven of those weeks prompt gas traded through the previous week’s low. A $.445 rally…less than a technically normal 38.2% Fibonacci retracement (the rally was 34.1%), that ended with a reversal from what amounts to first weekly resistance (the confluence of moving averages) is not technically constructive.
The twin weekly failures…both closing not far from their respective weekly lows, does not bode well for the near term future of about to expire September or prompt – in – waiting October which is currently awarded .158 premium.
2 b: A retest of the zone of support between $1.918 (the high of the high weekly close during March) the July low, $1.856 and the remaining sliver of the April 29th “expiration gap, $1.848 – $1.856…which is also the upper boundary of an eleven week trading range constructed between mid – February and late April , is suggested.
With that said, calendar August is still an “inside” month (within the range traded during July) and with only five trading days remaining ended the past week very close to where prompt September opened on August 1st ($2.046). From 2007 through 2017 the July lows were violated during August in ten of eleven years but have been only once during the last four years.
We are in the crux of that historically consistent price negative period (08/15 – 09/15). The twenty – year average of declines from “Q2” highs to “Q3” lows is 31%, the ten – year average is 25.9%, five years is 24.4%. Since the June 11th Q2 high prompt gas has already traded 41.3% lower. Perhaps the lion’s share of the seasonal weakness has already been discounted, but prompt gas has two other potential price negative tendencies to deal with.
Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance:$2.18, $2.25-$2.310, $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16
