Category: Daily Call

The market showed some serious juice — just when I was not around to comment. Well actually, the juice came on Monday and Friday and the rest was rather un-inspiring. Let me summarize in technical terms — prices choose to blow down through some serious support zones and now look to challenge lows from October and possibly August. To say it had a bearish bias is an understatement, but don’t put this tech guy in the camp of winter rallies are over. The CFTC data was not published but I can assure you some additional speculative shorts entered last week. What does it mean?— look for additional probes lower testing support below.

We loose options today which is unlikely to provide serious volatility, but with the market opening higher last night with a gap in the Jan contract only to retrace that gap leads me to believe that we might have some volatility today. Remember the trend of the last 2+ years is that there is a rally during the expiration process— usually at the end. The speculative short increased their positions significantly before Tuesday of last week which also explains the potential of another short covering rally if the fundamental traders get spooked. While the “island reversal” has held — it is not beyond capitulation, rather just a trading indication. Will be travelling to enjoy the Thanksgiving Holiday at my daughter, house so there will be no Daily until next Monday, unless I get bored and find time. Wishing all of you that read my ramblings, a wonderful break from the routine and spend time with the family.

Not much to say about the price action post release but that prices stayed well above support zones and ended the day just about where they started. Lots of support areas below that have been discussed in the last couple of days— today will be set up by the fundamental traders and the expectations of the upcoming weekend.

The plethora of support prices held yesterday and now the market is setting up for the storage report. Have no clue what it is but am more interested in how prices react to this critical supply and demand report. Will state again as to the plethora of support zones …… The $2.52-$2.486 holds all sorts of importance. The 50 day SMA is at $2.487 and the 200 day SMA is at $2.489, the July high at $2.49 and then you have the long term support (until broken earlier this year) at $2.51-$2.52. Where does the market go— should support hold it is back up into the $2.64 area at first. A break down (on a daily close) opens up the low gap from Oct 28th at $2.346. It may stop short of that but that should be the target…

As expected, the declines continued to key support. The $2.52-$2.486 hold all sorts of importance. The 50 day SMA is at $2.486 and the 200 day SMA is at $2.489, the July high at $2.49 and then you have the long term support (until broken earlier this year) at $2.51-$2.52. Where does the market go— should support hold it is back up into the $2.64 area at first. A break down (on a daily close) opens up the low gap from Oct 28th at $2.346. It may stop short of that but that should be the target.

The importance of the failure on Friday for prices to close the gap set up the declines to test support. Would expect a test of major support between $2.49-$2.52 to be tested today and from there we will see. A break down will set up further declines while should it hold then a rally back to the mid $2.60’s will occur.

Discussed on Friday the technical importance of the island top in the charts on both the weekly and daily charts. Will not talk again about it but to reiterate the importance of that gap from a trade perspective. I am well aware that many of you trade on fundamental data (weather forecasts) and that is fine but to watch three tries at a small gap fail — it should tell you something about the kind of fundamental information that will be required to break through that area.

Fascinating trade yesterday as prices capitulated after the release only to rebound. At first, it sure looked like prices were going to head back up to challenge the island gap discussed here all week — then the report release, prices fell down to my initial support area identified only to run back up and once again try to challenge the gap. They never got close to the gap but they did trade a higher high than before the release. Without the break through, prices once again melted down and ended the day just above the initial support identified. HUH— the island top has strong volume supporting the initial gap up, then strong volume the week of setting the high and now the market seems poised to trade a strong volume on the gap down week. This volume level is key to defining the island as a significant resistance zone. Today has a chance to have near term price implications. Should the market choose to rise and close that gap, closure of the gap will likely be accompanied with high volume, but obviously the gap will be gone and prices will be given the green light to extend. Should the market rally and fail at the gap — it too will likely have good volume and the weekly volume will confirm the island top as a significant obstacle for the next few weeks.

Prices were headed and challenge the Minor Resistance at $2.57, only to find a plethora of buyers that took the market up to $2.60 at the close of the old outcry period and then extended gains another $.07 by the end of the day in Globex trade. Got no clue what that run was about but it sure looked to me that some of the late shorts got spooked. Well, perhaps now we will get a chance to attack the Island Reversal gap mentioned earlier this week. Never know with a storage report , but that gap gives a seller a low risk (stop out on closure) opportunity to reload. We shall see.

The market did not even attempt to go back into the gap so the key I spoke about yesterday has been mitigated to a large part. Temps will be cold for the next couple of days but this event was baked in last week. Going to be lazy cause I have nothing else to say….prices sent an “island top” for the market to deal with. This is a technical event where all of the supportive issues driving the market were left in the dust as prices gapped lower and never came close to filling. A sign of exhaustion of the buying which was all based on short covering discussed over the last week. If you don’t get gaining open interest on higher volume you don’t have a recipe for higher prices longer term. Perhaps the bulls will try to trade into the island but they will be me will serious selling from a group of bears that just got there claws burned….