Author: Willis Bennett

What the Market Gives It Takes Back

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Mentioned earlier in the week that the gap from a week ago Monday is a low risk sell– little did I know that the trade would profit and cover a portion at near term support in one day. I thought I would need to hold that short until the storage report — but that was not the case. Looking at the total volume from Monday, it was well above the recent total volume for the last week of trade days. It will be interesting to look at the volume from yesterday when it becomes final. The rally may well have been associated with short covering — but then did the shorts come back in yesterday? We shall see.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

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Rally Continued Beyond Sunday

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What is with this– all you fundamental folks are telling me weather forecasts are bearish for November and Storage will be HUGE at the end of the month– what gives with a $.50 rally. Oh- one reader blamed it on the early and Sunday trade and not the general market– Huh– yo fool — if it was so false and misread bearish bias, why did it not sell back in the full market– seemed like a great place to put shorts on. I digress– no clue why the rally but will mention that the market had declined for the month of October — and prices will not go down for ever in spite of some of your wishes. Would look to sell the gap until it closes above it– then flip and length for the top side of a new range. If it does close above it make sure you have some shorts out there.

Major Support: $4.948, $4.903, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

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Sunday Strength?

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Mentioned last Friday, that with the bearishness associated with the Nov trade — I fully expected the declines to continue and eat the premium associated with the Dec contract. While some of the premium was devoured, the market left a fair amount of meat on the bone (so to speak). Now, much to my surprise with all the bearish bias — prices are up in Sunday night trade? Have little explanation for this behavior, except as mentioned in the Weekly section — sellers may have dried up.

Major Support: $4.948, $4.903, $4.716, $4.705-$4.68
Minor Support: $$5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

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Dec Takes Over as Prompt Giving Up Some of Differential

Weekly Continuation

When trading was initiated, the declines from the previous week were extended another $.153. Extremely oversold, about to expire November reversed from a “sold out” condition, and rallied almost exactly a dollar (21%). November traded a $.755/dt range on its last trading day, then settled with one of the widest closing range in memory $4.948 – $5.438. After a brief failed attempt to build on the extraordinary premium awarded over expired November ($.689 vs $.004 a year ago and $.295 in ’20), new prompt December, which had traded as high as $6.281 fell to $5.547, before finding support and ending well off the low.

Over the last couple of week’s there has been discussions of the “technical damage” that occurred to the charts during the rapid declines in October. The violations of trend line, moving average and conventional support that occurred almost entirely without any intervening rallies. While this week’s reversal was a strong suggestion that the gas market was “sold out”, the market has a lot of work to do before any significant rally can be sustained. Further evidence of that can be found in the market’s inability to hold onto gains (selling the rallies concept). December closed $.579 lower than the high it traded on Tuesday with selling clearly evident at its 10 – day SMA from Tuesday until Friday, $.339 off its low. The most important factor for December will be whether it can consolidate within the range it traded during the past week. If it is unable to do that then look for a test of the low of November’s closing range ($4.948).

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Rather Subtle Expiration – Price Differential Remains

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Some slight convergence between the Dec and Nov contract as the Nov contract expired. Still left with a significant gap and would expect that the differential will be closed in the near future due to the recent bearish bias in the last month. Would expect that buying the the lows of the last month down to $4.90 with tight stops a potential strategy or selling the current levels down is also an alternative, but need to be careful as the strength in the Dec contract during the slaughter of Nov raises concern.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

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Could Be Exciting

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Prices retreated a little during options expiration, but nothing conclusive was determined. The market is defining a “new range” and how it determines the high side and low end has some development yet. At any rate, and expiration on the same day as the storage report is likely exciting.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance:$5.32-$5.37, $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

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Differential to Dec Continues

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While the spread came in a couple of pennies at the time of this writing, I am still concerned about adding positions, whether long or short, while the intentions of the market deciding on the differential (closing or ignoring until Dec becomes prompt). Need to be careful and cautious during this period. There are a couple of different ways this game can turn out from a technical perspective and they revolve around the highs of last week, which coincides with the gap from last week.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance:$5.32-$5.37, $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

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Something Has to Give or Go

Daily Continuation

As alluded to, the over sold condition of the market extended early Monday morning to find support and develop a counter trend rally. Nothing major but a reversal day was over due for this market. How far does it proceed is anyone’s guess during the expiration process. After 5 consecutive declining days, it should be expected that prices rebound 33-50% of last weeks declines. More interesting to me is the dramatic and large spread between the Nov and Dec contract. During last week’s decline this differential got large (see chart below).

Spot November less December Contract

That differential blew out last week, expanding 25%. What happens— does Nov chase Dec during expiration of does Dec collapse and give up the premium after becoming prompt. My best guess is a combination of both.

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Bias Has Flipped– Expiration Coming

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Don’t see how the market could be more bearish — but when at these levels of being oversold (levels on six times in the history of trading — see Weekly section) the market historically taken a breath. What is going to be interesting to this trader is what happens during expiration. We have seen a series of strength month after month but that behavior was modified at the Oct expiration. With all the selling in the last couple of weeks is there a period of strength coming this month — Not sure but that’s why it will be interesting to me.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance:$5.32-$5.37, $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

Technical Destruction of 2022 Bull Bias

Weekly Continuous

The previous Friday’s close left the prompt below its 40 – week and the observation was made that in response to the weak close was that the violation of an important trend line should considered a potential. Prices didn’t take long for the market to resolve that potential and the prompt gas gaped through the trend line leaving a weekly (and daily) continuation gap that the November contract never threatened to fill.

The expectation if the critical trend line failed to continue to limit the decline was a test of conventional support presented by the June/July lows at $5.33and likely during November’s tenure as prompt. That didn’t take long either to blast that support. An absence of buyers and abundance of sellers drove the prompt lower each day. On Thursday November traded through the last higher low of the long 2022 uptrend.

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