Author: Willis Bennett

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

Waiting For Love

Daily Continuation

Over the last 10 trading days the market has traded in a $.35 range and have little or no interesting in breaking out or down. Where is the love (especially considering the time of the month). What are we going to do here? Discussed in the late Weekly diatribe that the market seems to be “basing” — built into that term is the concept that from this period prices rally. The other term to use is consolidation for this trade — not insinuating the upcoming move is up or down. I believe that price are consolidating but could be basing if the shorts don’t develop the power to extend.

Major Support: $2.533, $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

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The Daily Is Back

Daily Continuation

Thanks for all the kind wishes over the last couple of days– gas, really, did nothing to catch my attention from bed. Still in the range from last week — but the market does seem to be “basing” here (see the Weekly Update) for some additional tests of resistance. It was informative that the declines on Monday were reversed on Tuesday and the selling ran out of follow through. Seems to be developing a new range near term– for the longer range thoughts bring up today’s Weekly.

Major Support: $2.533, $2.422, $2.238
Minor Support:
Major Resistance$3.536, 3.595, $3.63, $3.789, $4.128, $4.22-$4.39, $4.75-$4.825, $4.948

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Further Evaluation

Weekly Continuation

Feeling better and capable of bringing thoughts together I offer this Weekly updated for this week’s action. It may be that the “inside” week (concluding last week) is just a pause for an astronomic oversold gas market, but I beginning to think that the downside momentum developed since those bearish momentum divergences way back in August is finally exhausted or getting extremely close to it.

The gas market fueled by speculative fervor (previously discussed Managed Money position short gains) characteristically take trends further than what is sustainable.. Prices did that in June ’20 when there were projections of a prompt price under a dollar then it did that back in last August when prompt September fleetingly visited the rarefied air over $10 for the first time since the hedge fund inspired run in the spring and summer of ’08. Last summer’s correction was quick and efficient.

My view is that the gas market has just begun the basing process and its early, only one week removed from trading a lower low, but most technical objectives have been met and then some. While the consensus of technical indicators is still solidly negative, the extreme state brought by the most recent phase of the decline (from the November/December highs) moderated a bit. The weekly RSI are still extreme and the RSI has ended in its EXTREME zone for the last six weeks…it has not done that since the decline from the ’08 high. Being extremely oversold does not mean that an indicator can’t get more oversold (witnessed that over the last few weeks), but that’s not the history of the purely mathematical indicators. More interesting is something of a change in the market’s internal characteristics during the past week. Volume has been increasing as the market fell that’s what is supposed to happen if a trend is to continue, but last week the volume starting increasing as the market rallied. On Tuesday 619,703 contracts traded…the highest daily volume since June 14th. The range traded that day was $1.881…the range traded on 02/07 was $.192. What I expected to see the next day was that open interest had declined indicating that a bunch of shorts had covered an existing position but that did not happen. Rather, open interest increased 7,362 contracts– that could show a strong indication that more than enough new buying came into the market to offset the amount of short covering. That is the first technical positive suggestion from market internals since the fall.

Major Support: $2.533, $2.422, $2.238
Minor Support:
Major Resistance$3.536, 3.595, $3.63, $3.789, $4.128, $4.22-$4.39, $4.75-$4.825, $4.948