Category: Daily Call

Apologies for no daily yesterday but I had a family medical issue to deal with— the rally was stopped two days ago and continued yesterday with the declines. As mentioned on Tuesday, the fundamental traders were asking me why prices rose on Monday — which left me speechless. Guess we tested support and failed so lets test resistance. This week it seems to be — tested resistance and failed so lets test support— see what happens. Range Trade would look for last weeks low to stay and then another run after a test.

Perhaps there are a few looking to find the shorts but I am confused as to why some strength yesterday when all the fundamental folks tell me that temps are normal to above in the coming weeks. I don’t follow so could care not but there is a strength in the market that could create problems to the short crowd. Monitor this as trade moves this week. High volume reversal off the lows last week suggests the lows for the Jan contract may be in. The strength when not supportive may be indicative of a rotation rather than a commitment to the future.

Prices last Friday could not close above the previous Friday close. That is not a bullish indicator for the start of this week. the speculative short folks increased positions last week (CFTC report dated Dec 10) so they are continuing to expect additional declines. Not sure where the impetus to force the shorts to cover with the forecasts where they are. The market has a bearish bias and would continue to play that until the fundamental trade changes. Declines will take prices back to last week’s lows ($2.158) down to $2.12. Rallies (similar to last week) will find selling into the mid $2.30’s.

For some reason, that I have no clue of, Natural Gas is uncomfortable with gaps which why the gap to the high side is so critical. The gap at the beginning of the week has now been filled (little surprise) what will be more interesting is how the trade responds. I would expect some slight further extension, but there was not the short covering response I would of expected. Have little clue what fundamental reason is for the support this week but I have commented on the gaps on Monday depending on weather. If you are a seller let the folk tell you where they are going to take the trade and have some stops for Monday. If you are a buyer, be careful of the bearish market in general. Did I mention it is Friday the 13th.

Not enough juice to close the Daily— perhaps the storage report will provide. Not a lot of changes from a technical standpoint — just be patient and play the near term range ($2.32-$2.18). Continue to sell rallies (if you want to consider a $.10 run a rally).

Prices rebounded and closed the gap from the Weekly chart at $2.289 but have not closed the gap in the Daily. Judging from the general sentiment (bearish) would be developing a strategy around selling this run in price at some point. The top side of the gap is an area— it did not go unnoticed that after it closed the Weekly gap prices retreated three pennies in 15 minutes— so perhaps a similar result will occur if the Daily gap is filled. Over-all trade the bias and look for rallies to be sold on into Q1 without a major shift in the fundamental forecasts.

Huh— prices gapped lower but just went nowhere during the day. On the opening prices tested $2.158 then rebounded and when folks got to work, prices just traded between $2.20-$2.24— not what I would consider follow through type action. This is not a fundamental website so many of you have tried to explain the weather forecasts creating the action — great — the forecasts must of gone quiet cause prices went nowhere. Good luck on predicting weather, I will stick to technical data points— they include weather. Currently, bearish bias.

Just when I cautioned about the perils associated with shorting the winter contract, prices gapped lower on late Sunday trade. My reasons for warning is to keep you aware of the potential of an issue before it happens. I have little knowledge if a short covering rally is going to happen. Looks to me like the trade wants to test the low teens in the January contract so play along accordingly.

Mentioned earlier about the perilous nature of shorting the winter in December — so I went back and produced the chart above. The Commitment of Traders Report (CFTC) is released each Friday representing position of the Tuesday of the same week and it shows the Managed Money (speculative) short and long positions at that time. Looking at the Speculative Short Position chart above notice the two blue circles at the lows in Dec ‘15 and the lows in Dec ‘17 and what happened to the short position (volume of contracts purple line – right axis)when some event (likely a weather forecast change) forced the shorts to cover. In Dec ‘15 it was an $.80 gain (nearly 50%) and in 2017 it was a $1.00 gain. I bring this to your attention not suggesting it will occur this year but as I mentioned earlier this week you have to be very nimble shorting an early winter market. Each of those years had supportive fundamental data for the declines (just as this year) but when the forecasts changes — everything changes. Have fun be nimble.

Prices fell to test resistance in one day only to turn around two days later and test resistance. Continue to play the range until it breaks out of the range. Wanted to go into the perils of shorting a winter market but couldn’t get the charts to look good— will work on it again tomorrow.