Category: Weekly Detail

Weekly Continuous

While still suffering from whatever little kids spread amongst themselves, I hope you bear with this week’s Weekly analysis.

Last week in the Daily editions I mentioned several times about the potential of a short covering. Unfortunately, that did not happen at least not yet. Rather than a short covering rally failure to overcome the declining resistance triggered a high volume extension of the down trend through the November low ($2.669) for the seventh straight year (and 9 of the last 10 the November low has been violated during December) and support expected to be presented by the 200 – day SMA but did not happen. With still higher volume the highest volume day since the October high (678, 722 v 682,359 contracts, and before that the August high 805,853) January plunged to begin a test of substantial conventional support presented by the July/August/September lows, $2.463, $2.425, and $2.500, respectively. Check the Weekly chart below:

Weekly Continuation

Going to keep it brief this evening and will expand during the week as my granddaughter decided to give me her respiratory bug. Actually, not much to say except the element of trade that has kept the market from becoming grossly over sold is the premium that the new prompt brings after expiration of the previous contract. Will go into the specifics during the week but the market is oversold and is setting up for a reversal (doubt it will be today).

Major Support: $2.82-$2.78, $2.74, $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.68, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

Weekly Continuous

There are four trading days left in calendar November and the prompt has lost $.753/dt ( 21% from the 11/01 high to Friday’s close), while prompt – in – waiting January has lost $.842 as the premiums awarded deferred months continue to be compressed. This week’s low for January gas, $2.933 also happened to be the same as the contract’s low for the first week of June 2021.

With the weekly close only $.115 higher than the low close of 2023 and $.259 higher than the low close of 2021 (all weekly closes of ’22 were higher), the market may be providing opportunity to add to length. Note that December ’24 is currently priced at $4.039 making the “new” continuation strip certainly higher when December goes to settlement and is replaced. My thoughts are not to pay the premium that results from that replacement but rather to bide your time and wait for the premium in the differed contracts to dissipate while keeping a close eye on the support between those old continuation lows and the average settlement value of the last twelve months or so.

Weekly Continuation

Since closing at $3.473 two weeks ago (the second highest weekly close of 2023) prompt gas has given up $.513/dt on a weekly closing basis. The rally from the March low to the October high ($3.630) has been retraced by a little over the 38.2% (Fibonacci retracement–technical level) but prompt gas remains above the intermediate term uptrend defining trend line rising from the April – May lows (Chart above). This trend line has been tested several times since the spring low. I would allow this as a pretty normal correction– 50% retracement of the rally is $2.787, which happens to be almost exactly the price needed to close the “expiration gap” left on 09/28 (natural gas abhors a vacuum). Prices declining will once again test the rising trend line (on a daily continuation basis the value of that trend line begins the week at $2.807) then test the 20 – week SMA (currently $2.832).

Technical thinking was that December would retreat to test support at the double bottom left on 10/03 and 10/23 (twin weekly lows at $3.216), the lower boundary of an orderly trading range. Indicators did not expect the gap lower on 11/06, a gap that remains open and confirms an RSI bearish momentum divergence. The combination of those technical factors suggests declines have not concluded.

Weekly Continuous

Lets look at the technical side of trade last week– Lower low testing major support (holds for now) on increasing volume and increasing open interest. That sounds like a market that wants to decline further. The big area is the support zone where trade left last week at $3.00 should it hold then prices may rebound to test breakdown areas at $3.16, $3.25, and $3.32. Further declines will send prices back to the range trade of the late summer ($2.80-$2.64).

Last week’s action was off of bearish weather reports for November but I am not convinced they can get any more bearish and it is likely that weather will change. The bearish start to Q4 prices reminds my of a couple of years ago — but I have to look them up to comment. In the meantime — wanted to have you look at something I wrote to a client last week..

Weekly Continuous

Despite new prompt December’s $.319 premium over expired November at last week’s close there was no expiration gap to begin December’s tenure (as there was on 09/28. Rather than building on that premium as November did, the new prompt immediately began to narrow the difference. December traded lower $.165) but not nearly enough to reach the target zone ($3.16 – $3.25). The price decline then rallied to a higher continuation high confirmed a new short – intermediate trend line.

On a continuation basis prompt gas traded a higher weekly high, began to challenge some old support that was decisively violated during the collapse from the ’22 highs (the December ’21 low and the low of calendar ’22, $3.543 – $3.638, see chart above), and closed at the highest weekly settlement since the first week of ’23. As bullish as that seems, December failed for the third time in four weeks at its 40 – week SMA, ended the week only $.032/dt higher and clearly remains in a range.

Weekly Continuous with Volume

After selling lower prices could not far enough to close the gap from the Sept 28th expiration low and gap ($2.781 – $2.820), soon to expire November flipped, rallied, and filled the gap on the high end from the previous week and then extended the rally another +/-$.20 before fading into expiration. Even with the decline from $3.401 to settle at $3.164 November went off the board $.265 above last week’s close and at the highest contract settlement value since January ’23 at $4.709 in Dec ’22.

Mentioned in the Daily and Weekly reports of the tendency for prices to return to test the breakout level of support (resistance once violated becomes support if the breakout is valid). Prompt gas followed that technical script closely, but while that was going on November remained confined in a range it had created and discussed last week, trading between $2.825 and $3.485. Just before October expiration November tested the lower boundary of that zone. Two weeks after that successful test it tested the upper boundary of that range (trading to $3.471- just short of its August high. The Nov prompt’s strong rally into expiration, a very rare event in 2023, fell well short of that upper boundary $2.401 vs $2.471, and the settlement at $3.164 was just about midway within that range.

Weekly Continuous

Technical analysis holds that once price has broken through the upper boundary of a well – defined range of significant length and done so with internals confirmation of the break, the technical expectation is that the prompt will return to test the breakout level. If the breakout is valid volume during the retracement will diminish and open interest will fall–not necessarily back to the prior low (the total number of contracts outstanding on 09/27 with price at $2.764 was the lowest since 01/30). Support bracketing the old range boundary will limit further decline and prompt gas will trade a higher low and begin to recover for a retest of immediately preceding high. Assuming that price action confirms the breakout level the last low and the higher low will provide anchor points for a new short – intermediate term uptrend. In the current case the upper boundary of the trading range was defined by the March high and then the August and September highs, all between$2.997 and $3.027.

Discussed a comparison to a similar range constructed between Q4 ’20 and Q2 ’21 . Once that construction was resolved to the upside prompt gas did not exactly conform to the expectation of testing the breakout. Rather, trade went very quiet for over two weeks then prompt gas tested support and provide an anchor point for a rising trend line that held over the next four months.

This past week, November started out lower, but rather than retreating enough to at least close the remainder of the “expiration gap” left last Thursday prices reversed from a low of $2.820 and posted a strong gain that was reminiscent of the rally to the August high (from $2.457 then prompt September rallied to $3.018 in five trading days) only to fail. This time the resistance that began to be defined by the March high ($3.027) and was further defined by highs during August and September ($3.018 and $2.997) failed to stem the surge of enthusiasm to buy November gas. By the time trading ended for the first week of October prompt gas added $.409 to last week’s close, putting some distance above last week’s first close over the 40 – week SMA since the peak of the December rally (Chart above). Friday’s extension of the rally also left November above its 40 – week and the continuation 50 – day SMA above the 200 – day for the first time since last November. Cannot define this as anything but positive technical events.

Another of the things that changed this week was that increases in volume and open interest accompanied the rally.You may recall that the lack of coordination between price and increases in the number of contracts outstanding and the number changing hands has been repeatedly discussed in the past (as recently as last week). Agreement of price change and market internals is critical for a sustainable trend. A week ago, their divergence was cited as the reason that the consensus of technical indicators failed to reach positive for the first time in many months. That flaw was cured this week. Higher prices (breakout over $3.02) with higher volume and expanding open interest matches the definition of a technical breakout.

Weekly Continuous

One of the most significant changes that the market provided was that October was bid into expiration and it has been months since we have seen that. After closing lower on Monday the expiring prompt reversed higher, on with pretty decent volume, and went off the board at $2.764, which was $.19/dt higher than September and the highest monthly settlement since February at $3.109. Settlement was notably still below the resistance defined by the June/July highs (the pre settlement high was $2.781), but premiums afforded November quickly changed that.

I spoke, recently, about the premium awarded November had fallen from a historically generous $.502 on 08/15 to $.242. When October went off the board that premium had been further reduced to $.135 ($2.764 v $2.899) which is more in line with the traditional norm but still more than enough to leave the expected “expiration gap” ($2.781 – $2.868) . Continuation resistance ( March and August highs $3.018 – $3.027) proved too much to overcome and now the September high ($2.997) has been added to the formidable resistance zone. The gains left the calendar September close $.165/dt better than the August close and the highest calendar month close since December and Q4 ’22 ended at $4.430.