Author: Willis Bennett

Gas Continues Recent Behavior

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It certainly appeared that tendency was at work when September rallied to close higher for five straight days from a low of $2.457 on 08/02 up to test the March high, but there has been a different tendency during ’23, to which there has been little discussion here. The only expiring monthly contract this year that has had a semblance of a rally into expiration (a trend contrary to the trend of 2021 and 2022) was July and it lost about a quarter on its final trading day. After printing the June Q2 high on 06/28 expiring July traded an “outside” day reversal to off the board at $2.603. The others either traded the low of their tenure during the last three days before expiration (January, February, March, April, and August) or fell hard from a lower high (May $2.385 to $2.101, June $2.685 – $2.143). The last week there was too much attention to the 08/09 high volume breakout through the June/July highs. Still, despite a new low daily close ($2.486, the lowest daily continuation close since $2.485 on 06/20), trading through all those weekly lows (five between $2.457 and $2.536) and briefly through the 20 – week SMA (currently $2.471) September managed to recover enough to hold the fledgling up trend defining moving average and the trend line rising from the April – May – June lows on a daily and weekly closing basis.

Over the five Fridays of prompt September’s tenure there have been four lower weekly closes. September’s net loss since Friday 07/28 is $.167/dt September giving up its premium plus $.026 at the low daily close of its tenure. It’s not like they took September and shot it. The more interesting elements are that over those same four of five losing weeks the current one – year strip is only $.008 lower. If September is $.167 lower and the strip is only $.008 lower there must be some under the radar allowing strength to occur somewhere. As it turns out, the average of November ’23 – March ’24 is $.037 higher over the same period. Seems to me that is supporting evidence for the thesis that sponsorship for deferred and distant deferred contract months is slowly gathering. For now, there is no doubt that the trading range that confined successive prompts for all of Q2 (perhaps setting up a similar range for Q3), will continue to be the primary consideration (meaning the appropriate strategy for traders to buy weakness – sell strength). Expectations are for the October to give up whatever premium is awarded when September trades its last, but it seems reasonable to point out that every time that prompt gas has traded into the mid $2.40s since the middle of June (prompt in waiting October into the mid $2.50s) the zone on either side of $2.80 has been tested.

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Startling Response to Bullish Report

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When prices don’t rally on bullish news (storage report) then you have a segment of folks lining up to keep the price low– question is — how long can they keep it suppressed before another short covering rally like two weeks ago. It is a bearish seasonal period though but running out of prompt.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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If Not Now– When?

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Prices continued the declines and are now clearly wanting to test the calendar July and late Jun lows– Then what happens but the test needs to occur.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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The Ranges Keep Getting Quieter

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Prices stayed quiet after the initial declines– patience is the best trading advise I can provide — play the outer ranges and if bored sell premium.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Where Do We Go — Nowhere

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Discussed the possibility of price action dying during the summer and staying in a range. My worst fears seem to be occurring.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Price Action Declines to Support

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The quiet declines continued into the close on Friday with prices firming just below the $2.57 – $2.60 zone. Due to a close of weekly prices below the previous week’s low- the technical expectation is for prices to extend the declines further. History tells us that the Labor Day weekend is historically linked with weaker prices so this will be interesting to watch. From a trade perspective, buy the lows of the range and sell on the rally off of a failed test.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Declines Occur With Lower Volume

Weekly Continuous

After trading just briefly back above the June high ($2.839, the previous week’s high was $2.863) September gas reversed lower, again failing to close above the zone of resistance between the June and July highs with an increase in open interest. That failure brought a decline further than anticipated but with a substantial decrease in volume. The target suggested last week was $2.60ish but that zone of defined support did not limit September’s fall as the prompt traded to a low of $2.524 before recovering to close at $2.551. Notably, the close was well above the cluster of weekly lows that traded between the end of June and the beginning of August (+/- $2.45 –$2.49) but also below last week’s low. A lower close below the previous week’s low infers additional weakness coming.

Despite modest price erosion of near term gas over the last two weeks, September closed $.026 lower than two weeks ago, but the strips are higher with winter $.136 over the last ten trading days, one – year $.092 higher. Perhaps that’s how the Q3 seasonal pressure plays out this year. The strips are much closer to earlier highs. Prompt gas traded that Q2 high on 06/28, the high daily close of the winter ’23 – ’24 was $3.613, Friday’s close was $3.612. The high daily close of the continuation one – year during the closing days of June was $3.363, Friday’s close $3.307. Maybe my analysis is way off base but seems to me those differences suggest that sponsorship is building for deferred/distant deferred contract months.

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Consolidation With In the Range

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The storage report provided little or bias impact so prices spent most of the day consolidating in a tight range. As suggested a few weeks ago — this may be as exciting a trade as Natty will give us for a while.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Declines Extend

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In the Weekly section on Sunday — I expected a decline to be retesting lows around $2.69 — well I missed that decline by more than $.10. Now what – perhaps additional declines to $2.47 may occur but they are likely to be brief. My expectations are that the low end of the new range should be completed (near term)– from which prices will rally back to test resistance.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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OK – Support Zones Tested

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What can I say — my expectations were a day early and I got my test for support a day later than when I suspected. Regardless, the market is defining the upcoming range that it will likely trade within during the next couple of weeks.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.74, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.536, 3.59

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