Category: Weekly Detail

Seasonal Weakness Approaches

Weekly Continuation

The market is approaching one of the most consistently price negative periods all year. For those that care about such things, I can provide a schedule Larry Marshall has maintained since 1995 if you need to see it. The declines bracketing Independence Day which shows a quantifiable decline usually from a mid/late June high to many times a just post – holiday low. While some of the declines are negligible (just 6.2% in ’19) and some are dramatic (35.7% in ’08) the 3, 5, 10 and 20 – year averages are pretty consistent, 14.1%, 13.7%, 13.5% and 16.4%. The 3 – year average 14.10%, the 5 – year average is 13.68%, and the10 – year average 13.47%. Refresh your memory in 2024 the June pre-holiday high at $3.159 to the early July low at $2.249– before extending the declines through July to early August– setting the low of $1.882. Looking at last week’s rally as the pre-holiday high at $4.148 a similar decline to the historical averages would indicate a $.58ish decline around or after the holiday.

Not sure how the mid-east issues will impact gas prices as the crude prices will be well bid going into the week. Think it would be prudent to sit on the sidelines until the response from Iran gets defined.

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Stalled

Weekly Continuous

What can you say after another week with little or no movement beyond the ranges established. Will note that a higher high than the previous week is a bullish signal but the failure afterward was mitigating. From a technical stand point — nothing to really add or try to embellish from my recent comments. Sell the premium until the market decides on a bias.

Major Support: $3.054-$3.007, $2.97, $2.727, $2.648,
Minor Support :$3.46, $3.30-$3.26
Major Resistance: $3.628, $3.86, $4.168, $4.461, $4.501

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Rambling Through the Range

Weekly Continuous

The new prompt opened higher and immediately rallied to test resistance which was contrary to my expectations coming into the week. From the post – Memorial Day low at $3.098 prompt gas has traded 23.2% higher…exceeding the five, ten and twenty years averages for early June rallies by a couple of percentage points. The anniversary of last year’s June high is on the 11th. It would not be surprising if July stretches the rally a bit during the coming week but as detailed when then prompt June was testing the same zone last month, resistance to a significant extension of the rally is strong. The calendar May high was $3.840. In six of the last ten years (a mixed bag) prompt July has traded through the May high but has done so in each of the last four years. In two of those four July’s it traded the June high of the 8th and on the 11th (’22 & ’24). In the other two the prompt corrected from highs on the 15th and 20th before rallying into expiration. July has not traded through the May high, yet, but if it does and closes there, and above of its 50 – day SMA expect a test of resistance between $4.075 and $4.120.

On a continuation basis, since the high volume daily reversal on 04/09, prompt gas has constructed a trading range just about one dollar wide (between $2.86 – $2.87 (the low daily close has been $2.930) and $3.83 – $3.840 (the high daily close was $3.816 on that 04/09 reversal day). The upper boundary of that range roughly corresponds with the lower boundary of a range constructed between mid – February and early April. The low daily close during that period was $3.834. In the event of a “breakout” by prompt July through the resistance described earlier, the lower boundary of the previous more elevated range will provide substantial resistance. Because of the historical consistency of a mid – June high there is no suggestion for chasing a potential breakout higher.

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New Month Same Range

Weekly Continuous

After holding support at the continuation 200 – day when trading resumed after Memorial Day, June tried to rally ($3.511), but could not duplicate the strength into settlement of its two immediate predecessors. June’s last trading day was the opposite of the close of trading for April and May. Expiring June was hammered as it went to settlement, falling from that $3.511 high to $3.152, before settling at $3.204 still $.034 higher than May (which rallied .311 on its last trading day to find that level). Consecutive settlements at +/- the same price level suggests pretty good demand between +/- $3.15 – $3.21…which technical types like myself will call support. Supply, which technical types like to call resistance, has been by the settlement values of March and April, $3.861 – $3.906, hence the range I have been discussing for the last three months.

A week ago, July was bid $.391 premium to soon to expire June, a historically high premium for the mid – summer month. At June settlement that premium was reduced to $.353 but was still the highest in recent years. The last couple of times that a significantly greater premium was awarded to the prompt – in – waiting, the new prompt took off to the upside, it was suggested here that this may not happen. Plus, considering that the low level of open interest, upside vulnerability was may remain a concern.

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Definition of Going Nowhere

Weekly Continuous

I am starting off this week from a comment that an old friend and someone who has tracked natural gas commodity trading since the inception of the contract (Larry Marshall)… “Over the thirty plus years that this observer has watched and commented about weekly fluctuations in the natural gas market the number of times that a prompt has closed unchanged from the price on the previous Friday can be counted with the fingers of one hand…but that’s what happened during the pre – holiday last full week of June’s tenure.” I think my title sums up the gas market this past week.

I opined that the market may pause at the gap left on April 29th, but instead June hardly paused at the gap and the slightly rising 200 – day SMA before trading a new low for its tenure as the prompt contract with the close on Monday nearly at the low ($3.110 v $3.098) with increased volume, clearly appearing to be poised to test its April low. Remarkably, June retraced 50% of the decline from its May high with the highest volume since April 10th before fading to the aforementioned unchanged weekly close.

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Prompt Approaching Lows

Weekly Continuous

Last week prompt June traded at lows and June had traded through the previous week’s low and closed there. While volume was lacking (average daily volume fell 80,000 contracts) the reversal with a weak close brings a presumption that the prompt will be offered lower when trading resumes.

Discussed in previous writings about the historically consistent weakness that brackets Memorial Day. Most often a pre – Memorial Day trades to a high between the 15th and 25th followed by a decline to a low between the day trading resumes after the holiday and the 5th through the 7th trading days of calendar June. Last week’s high on the 12th is a little early but not unprecedented. In 2016 and ’17 the pre – holiday high traded on the 12th (Memorial Day fell on the 30th and 29th in those years, this year on the 27th). Declines from the highs in those years were 12.63% and 14.46% respectively. The low prior to an early June rally traded on 05/26 in ’16 and a more typical 06/05 in ’17. From Monday’s high at $3.840 to Friday’s low prompt June has already fallen .535 or 13.9%.

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Does It Build or Consolidate

Weekly Continuation

Last week’s rally was not among the things was not my immediate expectation. My view was that new prompt May would forfeit its premium and prompt gas offered lower to test rising trend line support and that technical “damage” done by the precipitous decline during calendar April (from a high on 04/03 at $4.203 to a 4/24 low at $2.858) including a weekly close below the December and January lows ($2.977 – $2.990) would render a significant recovery problematic at best.

The caveat was that in addition to vulnerability flowing from the persistent liquidation of open interest, prompt gas was severely short – term oversold and was two standard deviations below the 20 – weeks SMA for the first time in more than a year. As it worked out those conditions trumped the downside momentum that had built with six of seven lower weekly closes since the March high (the only exception was week ending 03/28 when new prompt May gained $.041). The weekly gain was the second largest for a prompt contract in more than a year ($.518 v $.565 for week ending 03/07) as June traded through layers of defined resistance as handily as it had violated similar levels of support.

Volatility…which can be a hedgers best friend or worst nightmare, increased this week.

Given the elevated level of volatility and this week’s range traded of $.814 (including the gap) it would be reasonable to expect increased volume. That did not happen. Average daily volume fell more than 25,000 contracts and the lowest of the week accompanied Friday’s .151 gain and strong close. Open interest did increase for the first time in four weeks but only modestly…+/- 10,000 contracts. Those are not the characteristics of a sustainable rally.

The rapidity and magnitude of this week’s gain left little definable support, June’s April low ($3.007) and the calendar April low and the low of week ending 05/02 ($2.858 – $2.859), but there is a ton of identifiable resistance including the 20 – week SMA…which as of late prompt gas seems to swing to extremes around. The 20 – week is currently $3.732. A few weeks ago, the solution for dealing with a persistent elevated level of volatility (the weekly ATR is $.587 and has been $.50/dt/week or higher since the beginning of ‘25/. In early May ‘24 it was $.306),

Major Support: $2.97, $2.727, $2.648,
Minor Support :
Major Resistance: $3.628, $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.03

Seasonal Tendencies Remain Intact

Weekly Continuation

After declining for the fourth consecutive week, the gas market is suddenly at least short – term oversold…both the daily RSI and MACD finished the week in their historical EXTREME zones and the weekly RSI is not far away. In addition, prompt gas which just seven weeks ago was extended nearly three standard deviations above its 20 – weeks SMA closed on Friday two standard deviations BELOW that important moving average. The last time prompt gas was there was during February ’24 during the construction of a multi – year low, from which prompt gas more than tripled.

This is hardly the first time that veterans have seen gas prices fall precipitously from a blow off high…2014 and 2018 are two of the more recent examples. Many times, the comments that “this time is different”, has been referred to here and in the Daily, but this time it does feel a little different to me. If for no other reason, prompt gas remains above clearly defined rising trend lines on the weekly and monthly charts. Those are the same two trend lines suggested here in late January/early February would be tested as gas traded down to a traditional late Q1/early Q2 low. While that did not happen, they are still there to be tested…and until they are decisively violated the uptrend from the above referenced multi – year low is still intact.

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Holiday Shortened Week – Brings Little News

Weekly Continuous

Due to an Easter celebrations — the Weekly and Daily sections of the website will be short in length. Last week provided little resolve to the previous week’s dilemma regarding bias but it was interesting to watch a lower low each of the trade days (technically a negative bias) but the open interest continued to decline each day (non-supportive of a bearish bias). Discussed here several times that volume is the energy that drives price trends and having declining volume levels last week sends a warning flag. There was not break down in prices but rather what I would characterize as a slow melt. At the end on Thursday (Friday – market was closed) there had been little resolution as to the bias for this upcoming week. The market did seem to hint at testing the $3.168-$3.11 gap in the Daily Continuous, but even if it opens down in the gap on Sunday night — the trend has been over the last few weeks, that what ever direction is established in Sunday night trade — the Monday full trading day reverses. Caution is advised.

Major Support: $3.336, $3.16-$3.11-$2.97, $2.727, $2.648,
Minor Support :
Major Resistance: $3.628, $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.03

Not So Fast Bulls and Bears

Weekly Continuation

Spoke last week about the expectations of a test of support at the zone around $3.68 — well that happened quickly and prices extended into the next support zone in the $3.30s before finding some footing associated with the enormous rally in all the markets (most importantly crude) after the early weakness. Associated with the volatile week was a massive liquidation of open interest, 58,210 contracts on Tuesday alone during the suggesting that there some disappointed longs, which triggered the necessary volume. From there the next area of support mentioned in the Daily was the target between support at $3.250 – $3.300 — the May contract could not fulfill that expectation. After trading as low as $3.336 May reversed higher to close at $3.816 (some would consider a solid reversal). It is not normal technical analysis, but a sudden switch from “risk off” to “risk on” resulting from events unrelated to natural gas was the trigger for the substantial high volume reversal. Crude reversed along with natural gas to trade nearly an $8 range, gold nearly $125, bitcoin nearly $9000 with similar volatile gains in risk assets across the spectrum.

Such events are unpredictable and are usually unwound, but are also often consequential. In the case of gas, the reversal traded with 1,122,556 contracts and further liquidation of 44,450 contracts of open interest as participants with short positions were whipsawed out of the previously falling market. Between the two events (the liquidation of long positions on Tuesday and short positions on Wednesday) total open interest was reduced nearly 100,000 contracts and another 30,000 on Thursday. There are not a lot of comparable wholesale liquidations that match those few days.

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