Author: Willis Bennett

New Q2 High — Now What

Daily Continuous

Suggested yesterday that a new was likely but was concerned that the break above did not hold during the day. That suggests a hesitation from those that are driving this train (bulls) to just push on. Not a lot of resistance between here and $10– so it should be a “convincing” trade. Just continue to buy dips, but leaving before trade ceases on the day. It is likely we will wake up and be down $.40– caution during this kind of volatility.

Major Support:$$8.73, 8.283-$8.24, $8.12
Minor Support: $8.065, $7.69,$7.36,
Major Resistance: $9.447, $9.60

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I Stand Corrected–Unlikely That Q2 High Is In

Daily Continuous

Mentioned yesterday that the it was unknown if the Q2 high was established and that upcoming trade would help define. If prices can’t set a higher high than the May high after yesterday’s gap opening and $.70 rally it is going to miss a great chance to break out above. Not many resistance zones above that level until you hit $10 and above. Declines will need to close the gap from yesterday at $8.73.

Major Support:$$8.73, 8.283-$8.24, $8.12
Minor Support: $8.065, $7.69,$7.36,
Major Resistance: $9.447, $9.60

Here We Go Again

Daily Continuous

Last weekend we came back prices were down big time — conforming to the historical Holiday weakness trend- now a week later and prices are back up challenging the highs from last Tuesday/Monday. As discussed in the Weekly section this volatility will continue to be prevalent for the coming summer months. Fundamental folks will blame it on the weather or the war — but notice that the prices on the futures in Dutch and London contracts are down– so ignore the “noise”.

The market will find the top on this bull run and not sure where but I don’t believe the May high is the calendar top and the jury is out on whether it is the Q2, seasonal high (similar to the 2008 run).

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Holiday Weakness Plays Out

Weekly Continuous

Historical Holiday weakness trend was right on cue last week. After a bid not far from Friday’s high when trading resumed prompt gas fell from $8.916 to $8.118 where support was generated from the rising 20 – day SMA (not commonly sighted here). July recovered from that test of support and traded all the way back to definable resistance just short of $9 (as discussed in the Daily last week), reversed lower and spent the remainder of the holiday shortened week churning between the two extremes, ending the week about in the middle.

The momentum divergences discussed here in previous weeks continued while market internals continued to deteriorate The momentum divergences discussed in previous weeks continues to exist and provide additional curiosity. For example, this week each day that price rallied to close higher, the volume declined –while it accelerated when price fell. With prices lower from Thursday to Thursday open interest (data lags by a day) increased nearly 19,000 contracts, suggesting larger positioning on the short side. When a market is in a healthy trend volume, open interest and price will move in the same direction (similar to the December and March lows), right now the opposite is prevalent. In summary for May–prompt gas ended May $.901 higher than on the last trading day of April while volume fell significantly. Open interest also declined during May (from 1,138,850 to 1,115,815). Rising prices – falling volume – falling open interest is a combination that is not likely to continue and underscore a problem within the market..

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Great Test of $9.00 Only To Run Out of Gas

Daily Continuous

The rally ran low before the storage release just below $9.00 and the collapsed after the public release. Found some brief support sending prices back up above $8.70 only to decline through the close. This week will provide some direction as discussed in the Weekly section and perhaps a serious test of support around the earlier low at $8.11 will get tested.

Major Support:$8.283-$8.24, $8.12
Minor Support: $8.065, $7.69,$7.36,
Major Resistance:$8.916, $8.996, $9.60

Solid Rebound Off of Trend Line Support

Daily Continuous

Not even a hard test of the support line drawn from the March, April and May low of continuous prices– but prices rallied significantly off of the weak test, creating a near term support for the monthly range. Suspect prices to rally up to the $9.00 area (early May high)– not convinced it will chase the calendar May high, created during expiration.

Major Support:$8.283-$8.24, $8.12
Minor Support: $8.065, $7.69,$7.36,
Major Resistance:$8.916, $8.996, $9.60

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Testing Trend Line Support

Daily Continuous

The Holiday weakness declines expanded the 5+% decline, taking prices down, getting near the trend line support (March and April lows in the chart above) that has been mentioned here for a while. The key is a break below that holds on a daily closing basis. A test and rally from will provide additional gains but a break down on a closing basis will likely create a test of the $8.00 area and just below.

Major Support:$8.283-$8.24, $8.12
Minor Support: $8.065, $7.69,$7.36,
Major Resistance:$8.916, $8.996, $9.60

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The Trend Is Your Friend — Until It Isn’t

Weekly Continuation

No surprising last week that June gas was well – bid into expiration and June was the fifteenth straight contract to enjoy increased buying during the last few days of its prompt life. What was surprising that the last support took prices through the early May high for June gas. The recent trends have had support tested after the start of trade month and last month was no exception as, June gave buyers a chance to buy weakness when it plunged from the aforementioned early calendar May high. As long as the tend and process of higher lows and higher highs (a primary characteristic of a longer term trend and discussed here for several months) continues it is likely that there will be a brief correction to the July prompt in the coming weeks. Whether it falls $2.566 (like prompt June gas) in less than three trading days, remains to be seen.

History tells us there is a consistent pattern that brackets Memorial Day Holiday. That pattern has, prompt gas setting a high between mid/late May and then declines to an early/mid – June low then rallies toward an early summer high. The average of the declines since ’00 is 11% – 12%. The 10 – year average of rallies from June lows is 16.65%. From the high traded last week at $9.447 to the low on May 27th ($8.285) represents a 12.3% decline well within the average. Not stating that the Holiday low has been established, but the current decline has met the average decline.

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First Day As Prompt — Weakness

Daily Continuous

Friday’s trade provided a little weakness and was extended in the light Holiday trade on Monday. Go into expectations and the upcoming trend that may continue and “rhyme” with the happenings in 2008 as well as other potential outcomes — but this week and next are going to provide some valuable insight as the the early summer action. The declines from the high’s last week ($9.40) down to the low on Friday ($8.285) have already met the average spread surround the Holiday period and with the market opening lower late Monday night– perhaps the Holiday related low has not yet been achieved. Continue to expect market volatility in the upcoming week and would be keeping trade horizons short as recommended for nearly a month.

Major Support:$8.548, $8.32, $8.283-$8.24
Minor Support: $8.065, $7.69,$7.36,
Major Resistance:$8.916, $8.996, $9.60

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Expiration’s Well Bid Continue

Daily Continuous

Though collapsing at the end of trade– the expiration was well bid as prices were $1.00 higher than last Friday following three up days and only one declining day (expiration day). July takes over as prompt and history leads to the expiration of some sort or retracement before or just after the Holiday. Some how — I don’t see traders selling into the Holiday weekend, but trade is likely to be light regardless.

Major Support:$7.663, $7.50., $7.00-$6.855, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187
Minor Support: $7.722- $7.69, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $8.996, $9.60

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