Higher Weekly Close

Weekly Continuous

A significant technical factor was Friday’s higher daily close, which leaves the daily closing trend intact. The trend of a series of higher lows…and now a higher high since prompt November closed at $2.258 on October 17th. This week’s close at $3.989 validates last week’s higher low at $3.354 and suggests trend continuation. The higher weekly close (see Chart above)…the highest since the beginning of 2023 (and above the 2016 weekly closing high) tends to confirm the breakout from a lengthy flat base. There is little definable weekly closing resistance other than a low close in February ’22.

At the low daily close in October the daily ATR (a measure of volatility that is essentially the average range of the last fifteen days), was $.119 and has more than tripled since then to $.359. Comparatively, during the rally from the April low to the June Q2 high the daily ATR increased from $.091 to $.205. Following the January ’24 high the peak was $.312 (the peak of the ATR usually lags the price high). The highest calculation of the last several years was $.769 in June ’22.

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Price Action Conforms to Precedent

Weekly Continuous

During the week ending 12/20 January broke out after a volatile consolidation period that followed the November high test of the upper boundary of a trading range that had confined successive prompts for nearly two years. The prompt closed at $3.748, the highest price since week ending 01/03/23. Price was higher but volume wasn’t (that sends a red flag to some technical analysts) to cast a skeptical eye. Over the entire 34 years history of natural gas trading there had never been an “inside” December (where for the entire month of December prompt gas remained between the price extremes traded during calendar November) and needless to say, there still has not been.

During week ending 12/27 January extended its price spike to $4.01 (the first trade to/through $4 since 01/09/23) before fading to go off the board at $3.644 (the highest monthly settlement since January ’23 at $4.709). February wasted little time before extending the rally to $4.201 with nearly a million shares changing hands on its first day as prompt but did not end the day (12/30) with a higher daily close than 12/24 another in a series of momentum divergences (a higher high (daily and weekly) without a higher close.

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Welcome 2025

Weekly Continuous

I mentioned in the Daily last week that I was going to quote a wonderful historical analyst (Larry Marshall) who has been following the gas market as long as I have. Here are some of the highlights of his thoughts……

Sometime in the late ‘90s I noticed a tendency of consistent price change at the beginning of each calendar year…almost without exception. Because of the consistency of the tendency and disproportional importance relative to the other eleven calendar months I came to call it the January Phenomenon. Each year about this time I write a summary of those year ending/beginning events…the following is not a lot different than more than twenty – five or so (I lose count) that preceded it.

Almost since the beginning of recorded time (which in natural gas trading for convenience begins in December ’91 – January ’92), late December/early January highs or lows have consistently been more significant going forward into each New Year than the endings/beginnings of other calendar months.

To summarize the 33 years ending since 1991 – 92:

Twenty three of the thirty – three have begun with a gap (although a couple of times the gap occurred during the last or next to last trading day of December).

At the end of ‘23/beginning of ’24 there were two gaps. The first, on 12/28 was an expiration gap…February was offered at a discount to January ($2.536 v $2.621). The second was on the first trading day of the year. Both were quickly closed.

Eight times (five of which began with a gap) the high of the year traded during January, most often during the first week.

Seven times (five of which began with a gap) the low of the year traded during January, most often during the first week.

In the other seventeen years (now 18), thirteen of which began with a gap, either the high of low for January (and in several cases neither) would not be violated for a period of months but once either was, it was consequential…setting the direction of gas prices for an extended period.

The January ’23 low traded on 01/31 at $2.037. That low was violated on 02/01. Prompt gas traded lower until late March, falling another 27%.

During the six years beginning in ’18 and ending in ’23, the January low was the low of the year twice (’21 and ’22). The January high was the high in ’19. In 2018 the January high was not exceeded until November, in ’20 during August. During ’23 the January high…$3.392 traded on 01/09 (the sixth trading day of the year) was not exceeded until November 21st. Prompt gas has closed above that high twice, the last time was 12/12 at $3.455…the highest daily close since 11/03/23.

All things considered, 2024 conformed pretty closely to the expectation flowing from the January Phenomenon. We are not sure what the 2025 January Phenomenon will provide but I do find it interesting that a gap has already traded on the 27th (last Monday) meeting the historical norm. That gap remains open and should be considered as support.

Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112,
Minor Support : $3.39-$3.31, $3.167, $3.00-$2.95, $2.914, $1.856,$1.89-$1.856
Major Resistance: $3.631-$3.681
, $3.829, $3.92, $4.00

Lack of Commitment

Weekly Continuous

January rallied nearly$ .50/dt…where it failed again at its 40 – day SMA and just short of the November high ($3.559 v$3.563). Prompt gas traded a range of $.490 between Tuesday and Thursday with January closing $.02 above its opening for the week ($2.280 v$2.260). For the second time in three weeks that prompt gas has closed a few ticks higher than it opened, continuing the interpretation of an indication of indecision.

Average daily volume spiked…with an estimated 3.85mm contracts changing hands (v 2.41mm last week). Increasing volume as price works higher is technically constructive.

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Back Into the Range

Weekly Continuous

January fell to test the target zone between $2.950 – $3.050 (mentioned in last week’s Daily), which corresponded to the upper boundary of the trading range constructed between early September and mid – November. The current prompt bounced from that clearly defined support, retested, then well – bid into the close, finishing the week above it. Prompt January closed $.289 lower, the first continuation decline in seven weeks. Average daily volume fell nearly 25,000 contracts from last week’s holiday volume (which was about 80,000/day less than the previous week). Declining volume as price falls is technically constructive (suggesting that the price decline is more corrective in nature. Accelerating volume would indicate that at least an intermediate term high is in place and unlikely to be retested. Total open interest for the five days (not from Thursday through Thursday because of the holiday) fell an estimated 7,500 contracts which is also technically constructive.

Typically the price of prompt gas falls from a mid – November/pre – Thanksgiving high (this year on 11/22 at $3.563) to an early December low. Wednesday’s low (12/04) at $2.977 has the earmarks of a typical early winter low.

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Not Much To Analyze

Weekly Continuous

December began the week with a gap higher ($2.748 – $2.769) and extending its rally to test conventional, moving average and mathematical resistance (all around $3.00).

With volume increasing (average daily volume was 180,000 contracts higher) and open interest declining (total open interest fell 57,000+ contracts from last weeks all – time high) suggested the potential for a spirited round of short covering. Unfortunately for the bulls, December failed at that resistance and declined to close Monday’s gap. Trade up to and failure at a nearly identical price in consecutive months suggests a textbook “double top”, not unlike the twin lows of then prompt November at $2.210 on 10/21 and $2.200 on 10/29, and previously before that prompt October at $2.214 on 09/11, $2.229 on 09/12 and $2.223 on 09/19, clearly defining the low end of trade range.

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History May Bring Range to a Conclusion

Weekly Continuous

December, which was awarded $.559 premium when November went off the board immediately began to forfeit that premium, reducing it to $.286 by Friday 11/01. December proceeded to gap lower to begin its first full week as prompt. Opening at $2.560 the new prompt traded to $2.514 before reversing higher. The $.281 range traded 11/04 was the widest daily range since a series of them in January (including 01/09 when a range of $.508 led to the to date high of 2024 at $3.392).

Despite the reversal with the highest volume of the week by a considerable margin, December was unable to build on the impressive recovery. Contracting ranges were traded between $2.818 and $2.643 with the low of that four day period traded just before the close on Friday. After trading a series of higher lows during ’21 & ’22 (the last of which was during 10/22) lower lows were traded in March ’23 and March ’24. While not definitive of the beginning of an intermediate/long – term uptrend significant higher lows have been traded during April, July/August and October.

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Weakness To Continue

Weekly Continuation

I have to apologize for the brevity of this submission, unfortunately there was death in my wife’s family and it will limit the writings this week. Would continue with the thoughts from last week surrounding the Dec contract to chase the gap that it was afforded at Nov expiration. My only caution is record level of shorts in the open interest analysis- so there will be a covering rally — just don’t see it in the imminent trade. Instead the gap from expiration gap left 10/30, $2.391 – $2.632 is the likely target for the declines.

Major Support:,$2.648, $2.35, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605
Minor Support : $1.856,$1.89-$1.856
Major Resistance: $2.727-$2.784, $3.00, $3.16

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Important Expiration This Week

Weekly Continuation

The soon to expire prompt plunged to test and reverse from the 40 – week SMA. The reversal from the long – term trend defining moving average support left November $.068 lower for the two weeks but back above its August and September lows, leaving the charts with the appearance of a failed break-down.

The December contract, still commands $.532 premium over November, traded an outside week reversal. Closing higher each day this week December rallied to test its 50 – day SMA, increased its premium over the expiring prompt and ended above the high traded a week ago with expected increasing volume (due to the roll). That weekly reversal and increased premium are technical positives that are likely to play an important role for calendar November and the remainder of ’24.

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Break Down and Extension

Weekly Continuation

Since October 4th December has traded to $3.406, the upper boundary of a trading range constructed on that chart since early July (the August high of December gas was $3.395), and down to $2.975-$3.000 is the lower boundary of its several months range (December set two lows during September, the first on 09/03 at $2.975, the second on 09/19 at $2.976, four times between 09/03 and 09/19 reversed higher from that support. Last week the sponsorship that had previously existed just on either side of $3.000. When that support failed last week, December traded to new contract lows back into the recent range trade.

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