Category: Weekly Detail

New Range To Be Tested

Daily Continuous

Two weeks ago, after February spiked to the highest settlement value for a monthly contract since September ’22, March began to make up its historically exceptional discount to an expired prompt ($3.732 v $7.460). Well – bid into the weekly close March traded as high as $4.425 late Friday, narrowing the still substantial “expiration” gap by $.436, but the enthusiasm for perennially amply offered March gas was short – lived. When trading resumed March gapped lower. With the most volume ever traded in a day (1,909,214 contracts…the previous record was 1,602,673 traded on 11/14/18 coincident with the Q4 and annual high of 2018) March continued to fall toward a bottom at $3.155 (27.5% below the new prompts close on the last trading day of January).

As March fell, open interest spiked 55,153 contracts (I don’t think that’s a record, but you can see it from there). If open interest increases as price falls it is an article of technical faith that the bulk of the selling was either short hedging of anticipated production or speculative short selling driving the bid lower (if the selling was from liquidation open interest would have fallen). While there was certainly some of both, I am pretty sure the latter was a significant contributing factor…because the following day when March rallied the total fell 54,189 contracts. A whipsaw for the ages for those folks ( illustrative of the dysfunctional state of the current market). Look for additional dysfunction in the coming month.

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Large Discount for March Contract

Weekly Continuous

February spiked to the highest settlement value for a monthly contract since September ’22 went off the board at $9.353. From the January low ($3.006) February rallied $4.821 to $7.827 in seven trading days before settling at $7.460. February rarely rallies into expiration. The February expiration event most similar in recent history was in late January ’22 when the expiring prompt , which had closed the previous day at $4.233 spiked to $7.346 before settling at $6.265. Expiring February ’26 traded a last day range of $1.927, and a last three day range (from the close on 01/23) of $2.552. March gas is almost always discount to February. Last year the discount was $.365, which was pretty typical of recent years. In ’22 February was $1.982 premium to March at expiration, this year a historically exceptional $3.728.

Six times in the last twenty years March has made up that discount to settle higher than February. It did in ’25 and in ’18 (those are the last two years that March settled premium to Feb, in ‘18 March’s discount was $.464 but did not in ’22.

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EXPIRATION WEEK

Weekly Continuous

I will be honest with you when I started to write the Weekly report I had just enjoying the Denver Broncos efforts in loosing the AFC championship game (no I did not go rather my daughter and son -in – law wanted to witness the game), so I sat and started to this only to witness a moment in trading I had not in years (Hurricane Katrina comes to immediate mind) so I broke off continuing and decided to wait to publish today (Tuesday) after the fireworks were done and trading resumed – if it did. You now know why I try not to trade the expiration of a contract and mentioned last week that, I would not be trading the Feb contract and sticking with the March prompt. The following was what I was going to start the Weekly with before the abortion.

On last Thursday, after surging $2.293 from last week’s closing price (including a gap between $3.230 – $3.380), February traded through the December high. Prompt gas trading through the calendar December high during January is not all that unusual, prompt February has done that in three of the last four years. What is unusual is doing that after trading to and through the December low (technically considered an outside month). Since organized trading of natural gas began during the spring of 1990 that has happened exactly ONCE before…in January ’24 and the reversal was in the opposite direction.

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Lower Low Established

Weekly Continuation

On the previous Friday (01/09) February fell $.238 while 1,084,681 contracts changed hands and open interest increased an extraordinary 53,147 contracts. The only explanation, characteristic of such extremes in market internals, is overly enthusiastic speculative short selling. On Monday the late coming short sellers were taken to the woodshed. With February gaining $.240 nearly Friday’s loss, open interest fell 37,369. On Tuesday as the prompt traded the week’s high but faded to a gain of only a penny the total number of contracts outstanding fell another 7,515. Once that bloodletting (buying to cover ill – timed shorts) was complete February suffered a $.299 loss and began the expected decline toward establishing a lower low and testing support bracketing $3.

Weather forecasts over the weekend turned dramatically bullish and the bullishness left a gap in the Holiday trade (expect that gap to be tested when forecasts modify). Prices rallied up to the 100 day SMA before backing off. Would expect that was fueled by short covering after last week’s declines.

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Bearish Bias Likely to Continue

Weekly Continuous

Prompt gas traded to a gap lower to begin the trading year on the second trading day of 2026. February managed to fill that gap after testing rising trend line support (from the August – September – October lows), but could not rally further than the violated continuation 40 – weeks SMA and last week’s close before reversing lower. February’s second test of rising trend line support was a resounding failure-the prompt plunged to the lowest price in eleven weeks, and did so with a substantial increase in average daily volume and open interest.

Looking to test the long – term defining uptrend line drawn from the ’24 – ’25 lows would occur coincident with maturity of the short – intermediate term cycle (and the anniversary of the March ’25 price spike) in mid – March. The current value of the slowly rising trend line is +/- $2.930. The current value of the March contract is currently $.535 discount to the prompt, and is well below that support zone. March is currently testing the continuation August low ($2.622 v $2.634, March’s 01/09 close).

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Two Weeks in One

Weekly Continuous

The analysis and comments on the market and its behavior will look at the entire two week period of time from my last Weekly published on Dec 22nd (before the Holidays).

January traded it’s pre – expiration low at$3.797 before nearly a dollar rally into expiration ($4.721) and going off the board at $4.687. Settlement was $.263 higher than December and the highest monthly contract settlement since January ’23 at $4.709. When January went to settlement February was offered at $3.986, creating a $.701 discount. February is typically offered at a discount to January, but $.701 is historically a little excessive. A year ago at January expiration Feb was $.234 discount to the expired prompt. Readers will likely recall that the new prompt gapped higher then retreated to close that gap before surging to a January high of $4.369. After volatile trade…that continued through the end of Q1, February ’25 went off the board at $3.535…a little more than a dime discount to January settlement.

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Wild Price Movements

Weekly Continuous

As expected the price action is hard to analyze from a technical perspective with the lighter trade (volume and open interest) during the Holiday period. One element that should be respected that even with the nearly $.40 discount of February to the January contract the prices have stayed with in the range established in Q4. Would continue to expect this trend to hold during the last day of the January as prompt.

Major Support: $3.82, $3.75 $3.654,
Minor Support/Resistance : $3.75,$3.65
Major Resistance: $4.00, $4.095, $4.16

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Price Presses Downward

Weekly Continuous

For several weeks while the market rallied to higher and higher highs the consensus of technical indicators steadfastly refused to acknowledge the price ascent with positive agreement. The last two weeks the consensus is neutral but with a deteriorating price negative bias. Once thing that the decline accomplished was neutralizing the extreme condition of momentum indicators

Volume two weeks ago the high last (the fourth highest volume week of ’25, 3,674,237 contracts) increased significantly (3,972,672). That is nearly 300,000 contracts increase while prices fell indicates that cause is being built to go lower which was confirmed last week. Price may well fall further (especially around expiration). Fun info- volume during calendar November was less than in October while price was higher, which is a volume divergence. That anomaly indicates that the sponsorship for $5.50 – $6.00 gas did not exist yet.

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Reversal Test the Nov Low Range

Weekly Continuation

The suite of indicators that I try to watch and monitor for three decades, will not tell you where an exact top or bottom is but they will tell you something about danger and opportunity. One of the rarest of all chart formations in natural gas (and most everything else) is an “outside” monthly reversal particularly when accompanied by exceptional volume (an “island” reversal is another one). This months reversal off of the highs now has traded below last months low. The last one occurred during January ’24. The high of that downside reversal was not the high for the year, but it took prompt gas until November to work its way to a higher high. In the entire history of natural gas trading at the NYMEX a total of 427 expired prompt contracts, there has been only one “outside” monthly reversal during calendar December…that one also to the downside from an EXTREMELY overbought technical condition (similar to this year). After trading through the calendar November ’05 high early in its tenure, prompt January ’06 traded to $15.780 on December 13th. On December 28th as it went to settlement that prompt traded through the November low ($10.880). That 12/13/05 high was a multi – year high that has not been tested since.

In terms of absolute price the December 5th high ($5.496) pales in comparison but December ’25 has some characteristics in common with December ’05. In ’05 price had just about doubled from the August low…this year +109% from an August low. Both highs traded within the counter seasonal window during the first half of December (typically, prompt gas trades an early/mid – December low and then rallies…vs an early/mid – December high before falling). And, as you might suspect in both years prompt gas was triggering EXTREME readings on virtually every indicator and threatening momentum divergence.

With all of that said, expectations are that January gas rallies from $4. Not back to the highs or anywhere close, but rallies. In the space of one week prompt gas retraced 50% ($4.059-the week’s low was $4.065) of the rally from the August low and nearly 38.2%. Those are typical retracement percentages in a bull market. The 50 – continuation day SMA is $4.052. That moving average and the retracement levels are substantial mathematical support along with the previous lows of the January contract and there is the expiration gap left on 10/30 that begins at $3.786 and is underpinned by the 200 – days and the 20 – weeks SMAs, a little further down.

Major Support: $4.219-$4.139,$4.083,$4.055,
Minor Support/Resistance : $4.46-$4.42, $3.75,$3.65
Major Resistance: $4.901, $5.01, $5.325, $5.37

Bias Change For Now

Weekly Continuous

In the previous Weekly and Daily writings, the handwriting on the wall that prompt gas would trade a higher high, it was suggested that January’s previous highs +/-$4.95 – $5.05 were likely to present formidable resistance. The zone of resistance did limit January’s advance (for a a few days) but did so with increasing volume and open interest. Price, volume and open interest increasing in tandem indicated that the market was getting a running start at higher highs.

Once January broke through the resistance zone, volatility and the range traded expanded. On Friday the low was $5.027 the high $5.496 (creating the range of $.469). You have to go back a way to find the last time a prompt contract traded a wider range. On March 4th prompt April traded $.495 with 1,094,416 contracts changing hands. That March high that established a higher high with less volume. They may still be counting but Friday’s volume looks to be around 1,107,300

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