Author: Willis Bennett

Still Need a Solid Test

Daily Continuous

Not sure that decline to the high side of the expiration process from last month — but it is what it is. Would of preferred a more dominant decline but it is a start. The storage report may provide the required strength to test support levels into the $3.35-$3.45 zone.

Major Support: $2.00, $1.795-$1.766
Minor Support: $2.41- $2.34
Major Resistance$2.836, $3.00, $3.536, 3.595

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Looking For Support Test

Daily Continuation

The second step of the bias change will come with a solid test of support and prices rebounding from the test. Yesterday just provided additional gains with volume expansion into the $2.70’s. Recent runs have provided technical damage to the bear bias of the last few months — but the medium term bias has not be defined — yet.

Major Support: $2.00, $1.795-$1.766
Minor Support: $2.41- $2.34
Major Resistance$2.836, $3.00, $3.536, 3.595

Reversal — Impressive — Time Will Tell

Daily Continuous

As expected, the bears got a little to far out over their skis and prices bounce off of the sub $2.00 low. Shocking — as the late coming bears (in the March contract) got gutted in the expiration process. Hard to announce that the reversal (as close as it comes to being an outside week reversal) has happened but a series of higher lows in the daily trade will be the confirming piece of information. Events like last week (see Weekly section) are usually the gas markets favorite way of announcing a bias change but it will need to confirm.

Major Support: $2.00, $1.795-$1.766
Minor Support: $2.41- $2.34
Major Resistance $2.61, $2.657, $3.536, 3.595

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Market Bias Maybe Changing

Weekly Continuous

After trading to $1.967 March rallied into expiration to settle at $2.451 (+$.484). Even with positive closes for its last two trading days, it was the lowest contract expiration since October ’20 settled at $2.101. It doesn’t seem like much, but prompt March rallied to close higher in two of the last three weeks, perhaps a redefining event– more importantly, the deferred contracts rallied a fair amount more than they did two weeks ago. For example, when March ended week ending 02/10 $.121 higher the summer strip was $.099 higher, winter ’23 – ’24 $.020 higher. This week with prompt gas closing $.176 better the summer was $.203 higher, winter $.128. Given the magnitude of the declines in those strips over the last few months, that may not seem like a big deal, but perhaps the gas market is beginning to change.

Following that first print under $2 since prompt gas spent about a week there while constructing the September ’20 low, March reversed higher accompanied by increasing volume (due to the Holiday shortened week I will us the average daily volume did increase modestly) Tuesday – Thursday was greater than the corresponding days the prior week when March was falling. Weekly reversals more likely when they begin from an undercut of a previous weekly low and an extremely oversold condition, have long been the gas market’s preferred method of communicating that the price pendulum had swung too far one way or the other. Often those reversals create momentum divergences because mathematical indicator. In this case the the weekly RSI, didn’t have time to catch up to confirm the lower price low (these divergences have been discussed previously).

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Strength Continues Into Expiration

Daily Continuation

Well the Puts are safe and now how far is this expiration run going to take prices. Mentioned over the last week or so about the short covering event that will be coming to the market– we are witnessing the short covering in the March contract — how far does this take remaining contracts is anyone’s guess. Dipping into the summer contracts has started showing some returns.

Major Support: $2.00, $1.795-$1.766
Minor Support: $2.41- $2.34
Major Resistance $2.61, $2.657, $3.536, 3.595

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Early Response

Daily Continuous

My apologies– I expected the bullish response on options expiration day not the day before– regardless the market for the first time in four weeks, found buyers and fewer sellers, allowing prices to rally on the day. Not surprising behavior based upon all the selling that has been occurring over the last few weeks. Not sure what the March contract does over the next two days — but I am sure I won’t be playing in that pool. I have been dipping into the summer months, now that winter has been defined. Will look at each summer chart and look for good levels to buy, considering the blood letting that has been going on since December.

Major Support: $2.00, $1.795-$1.766
Minor Support:
Major Resistance$2.34, $2.61, $2.657, $3.536, 3.595

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Looks Like $2.00 Puts Targeted

Daily Continuous

There may be some excitement coming as the decline’s have taken prices to the $2.00 area which is a very large position in open interest. The break down through the level will take March considerably lower and the puts are forced to cover. Best idea from here is to sit on the sidelines — let this extreme over sold movement conclude as it seems more about the decline in general rather than fundamental input.

Major Support: $2.00, $1.795-$1.766
Minor Support:
Major Resistance$2.34, $2.61, $2.657, $3.536, 3.595

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Going Down ?

Daily Continuous

Nothing more to be said that when a market breaks support and ends up down for the eighth week of the last nine, closing on the lows — well it just doesn’t get any more bearish for prices the next week. Sure enough, when we opened Sunday and through the light trade day, prices moved lower. Discussed in the Weekly about thoughts on the market forming a base / consolidating, so give it a read. How low does the record oversold market go — no clue but the risk / return on new shorts is declining each day.

Major Support: $2.238-$2.22, $2.00, $1.795-$1.766
Minor Support:
Major Resistance$2.34, $2.61, $2.657, $3.536, 3.595

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Bears Continue to Rule

Weekly Continuation

This week’s decline left the March contract and the deferred contracts below all closely watched moving averages. These levels have the weekly closing price at lows not seen since late September ‘20. Readers are no doubt familiar by now with the technical presumption that arises when price ends the week below the prior week’s low. More meaning is added to that presumption when the close is at a multi – year low. discussed last week about the market developing a “bases” or a consolidation range for which prices can rally or decline.

Primarily because of the gas market’s persistent extremely oversold condition my thoughts were strongly suggesting that the twelve – trading day range since the beginning of February was likely the initial stage of the construction of a defensible low. Undercutting the consolidation range puts that theory to rest (for now) but does not change the current extreme position the market is in nor the expectations of the near term future. Beyond that, acknowledgement that the historically disproportionately important January low, which withstood another challenge, there is little to add other than the eighth decline in nine weeks has left the consensus of technical indicators (which improved a little last week) profoundly negative, some indicators more oversold that at any time in the history of trading natural gas futures.

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Bears Find Some Love ??

Daily Continuation

Declines extended lower after the storage release and closed at the lows. Am I selling — no way as the market is still oversold from a technical standpoint. Am I buying at these lows — not the prompt any length will be in the summer differed contracts. Have not trusted the selling from the funds and the “spreading” action in the CFTC data — so not to choose that group of “individuals” I remain longer term and minimizing exposure.

Major Support: $2.422, $2.238
Minor Support:
Major Resistance$2.67, $3.536, 3.595, $3.63, $3.789, $4.128, $4.22-$4.39, $4.75-$4.825, $4.948