Category: Weekly Detail

Higher High then Retracement

Weekly Continuation

Prompt November traded quietly most of the week. From what proved to be the week’s low at $2.825 on Tuesday November rallied to $3.000 on Wednesday before reversing to close lower. A new high daily close followed $2.970, the highest daily continuation close since just after the June Q2 high, but with the lowest volume since 09/06. A higher close on lower volume is a form a penalty flag on any further run and not an indication that a flood of buyers is pushing price higher. Another higher high on Friday, to $3.019…squarely into the resistance, expanded the range a bit (through the first four days the total range traded was $.175 vs last week’s 15 – week average of $.281) and extended the rally from the July/August Q3 low to $1.163 (62.7% vs a ten years average of 64.1%) but another reversal followed, and test the low of the week’s range. Can not explain why but November contracts tend to rally during the first week of October.

A year ago after October was off the board November ’23 rallied smartly to a high of $3.471 on 10/09 and had become similarly overbought (the daily RSI reached 84.30 v a high of 81.13 on 09/30/24…on a weekly basis). Over the next ten trading days November ’23 came off from there to $2.861, before rallying to settle at $3.164. In ’21 November reversed from a high (on October 6th), and fell from $6.466 to $4.825 before recovering to go off the board at $6.221.

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Bias Change But Hang Tight

Weekly Continuous

Well that was different. October rallied to trade the high of its tenure as prompt on the same day it went to settlement, the first expiration month this year to do so (actually, the first month since July ’23). As discussed previously, eight expiring monthly contracts have traded their low during the days of the expiration process. While October faded $.105 from its expiration day high, $2.585 was the highest settlement value since July settled at $2.628 (after falling from the June Q2 high at $3.159), was $.151 higher than last week’s close and $.655 higher than September.

The new prompt November contract was awarded $.168 premium over October settlement (vs $.285 at last week’s close) began by narrowing the “expiration” gap to $.030 ($2.690 – $2.720), but quickly followed through to the upside. On Friday, November extended the rally to trade as high as $2.928 and was bid to a slightly higher high in aftermarket trading ($2.932) much like October was last week. Although Friday’s volume was less than either Wednesday or Thursday, the new prompt traded a technically positive “outside” day reversal higher and closed at the highest price since June 18th (July 8th for the November contract).

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Evidence of A Bias Change Continues

Weekly Continuous

For the third consecutive week steadily lower offers for the prompt gas ended with a reversal to the upside creating a higher low each time. Until late last week resistance presented by the upper boundary of a trading range that included the late July and calendar August highs had limited the reversal rallies. On 09/12 a high volume extension left October above that resistance but there was little follow through after the weekly closing violation and the prompt faded to test the continuation 50 – day SMA. The reversal from a successful test of the moving average support left the soon to expire prompt above the almost always important 20 – week SMA for the first time since the close of week ending 07/12, at the highest daily close since July 2nd, the highest weekly close since 06/28.

The technical case has been made that the successful test of the August expiration low coincident with September expiration (both $1.856 for a rare perfect double bottom), was likely the confirmation of a traditional Q3 low. Even so, the declines for the last eight expiring contract months gives me pause for thought. While I am still not convinced that October will hold onto its gains, two weekly closes over increasingly well – defined support…between the continuation 50 – day (currently +/-$2.23) and the late July – August – early September highs (between $2.270 and $2.301), along with the buying that continued through Friday’s close, which was essentially on the high.

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Higher Highs and Higher Lows

Weekly Continuous

Twice last week prompt gas traded reversals to the upside when it appeared that post – Labor Day seasonal pressure was beginning to weigh on October, both times from a higher low ($2.075 on 9/3 and $2.117 on 9/5, prompting a couple of thoughts: 1) that seasonal pressure had been exhausted as expiring September fell to test and hold the calendar July low, and/or 2) that weakness was being aggressively bought. On Tuesday, after retreating from last Friday’s test of the August high, October reversed again, trading another “outside” day reversal from another higher low ($2.125 on 09/10). With volume increasing October traded through the August high and closed above it. After extending the rally to $2.407, the highest trade in more than two months, October reversed lower with the lowest volume of the week but still managed to close above the August high.

A weekly close above the August high, the upper boundary of the trading range constructed since mid – July (resistance that limited rally attempts since then), becomes technical support, and goes a long way toward confirming that the twin calendar month lows traded at $1.856, was the traditional Q3 low.

While the gain for prompt gas appears to have resolved the continuation range to the upside, October was the only contract to post a positive close for the week. November, which failed almost exactly at its declining 50 – day SMA, finished just south of unchanged (-$.008) and the remaining months of the winter strip lost an average of $.074. The failure of deferred contracts to confirm strength in the nearby is possibly more characteristic of short covering (note that total open interest declined 21,500+ contracts). We will see if the rise in prompt and the decline in deferred contracts is indicative of unwinding previous positions.

The close above continuation resistance is a technical positive, but October’s failure to close above the almost always important 20 – week SMA (currently $2.353 and slowly rising) and the reversal from an approach to the upper boundary of a very well defined range on its own chart suggest that the burden of proof remains with the bulls. It is not suggested that end users chase the rally.

Major Support:, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605
Minor Support : $1.856,$1.89-$1.856
Major Resistance:$2.18, $2.25-$2.310, $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

Another Decline Into Expiration

Weekly Continuation

Back from the Canadian fishing and am not shocked at all to see what I missed. September fulfilled the expectation of declining into expiration as the eighth straight month to do so, and the fifth of the eight months that have expired in 2024 to trade the lows of their tenure as prompt coincident with expiration. Expiring September traded to the exact same price as expiring August as it went off the board. Both the calendar July and August lows were $1.856…leaving the remaining sliver of the 04/29 expiration gap still open between $1.848 and $1.856. Four weeks ago, when August first left the gap unfilled it was commented that it was clear that some folks were defending that gap and they still are.

A year ago expiring September also traded the August low (anniversary events are always interesting) after trading $.032 through the July low. A reversal from that low produced a bullish momentum divergence. The August low was the Q3 ’23 low and was not violated until 12/11. New prompt October, which was awarded $.167 premium over expired September immediately built on that premium gaining as much as $ .074 before fading to end the week still $.053/dt lower.

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Expect Expiration Weakness

Weekly Continuous

Discussed last week that weakness into the expiration was to be expected and now we have an expiration that the previous monthly expiration’s in 2024 have showed. There is nothing in the market that will prevent the trend from continuing. The more important question will be how much further the declines will occur. Still traveling but will be back after the holiday. n back – to – back weeks prompt September tried and failed to trade through convention resistance between +/- $2.250 and $2.300 and a confluence of declining moving averages…reversing lower after both attempts.

The continuation 10, 20 and 40 weeks SMAs are all declining and currently between$2.238 and $2.274, the high for the week was $2.278. Last week those averages were between $2.262 and $2.324, the high was $2.301. The weekly moving averages of the individual contract months are for the most part substantially higher…although the 10 – week of September is now $2.261.

Based on technical evidence provided by trade of the last two weeks the continuation moving averages are likely to continue to present declining resistance and guide the prompt and successor prompts lower until either the sponsorship develops to overcome the selling that will be coordinated with them or there is an “expiration” gap and weekly close higher…when they will likely act as support. Currently November with .555 premium over the soon to expire prompt, is the leading candidate.

Following the June Q2 high prompt gas closed lower for eight straight weeks (from weeks ending 06/14 through 08/02, For the last seven of those weeks prompt gas traded through the previous week’s low. A $.445 rally…less than a technically normal 38.2% Fibonacci retracement (the rally was 34.1%), that ended with a reversal from what amounts to first weekly resistance (the confluence of moving averages) is not technically constructive.

The twin weekly failures…both closing not far from their respective weekly lows, does not bode well for the near term future of about to expire September or prompt – in – waiting October which is currently awarded .158 premium.

2 b: A retest of the zone of support between $1.918 (the high of the high weekly close during March) the July low, $1.856 and the remaining sliver of the April 29th “expiration gap, $1.848 – $1.856…which is also the upper boundary of an eleven week trading range constructed between mid – February and late April , is suggested.

With that said, calendar August is still an “inside” month (within the range traded during July) and with only five trading days remaining ended the past week very close to where prompt September opened on August 1st ($2.046). From 2007 through 2017 the July lows were violated during August in ten of eleven years but have been only once during the last four years.

We are in the crux of that historically consistent price negative period (08/15 – 09/15). The twenty – year average of declines from “Q2” highs to “Q3” lows is 31%, the ten – year average is 25.9%, five years is 24.4%. Since the June 11th Q2 high prompt gas has already traded 41.3% lower. Perhaps the lion’s share of the seasonal weakness has already been discounted, but prompt gas has two other potential price negative tendencies to deal with.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance:$2.18, $2.25-$2.310, $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

Historical Trend Seems to Continue

Weekly Continuous

First Off– will not be posting next week and will have sporadic Daily updates as I am traveling into northern Ontario Canada, which maintains limited internet access.

It looks like the market wants to challenge the low end of the trading range for the September contract. There seems to be no momentum to take prices back up to the failure of last week at $2.30. That behavior will likely continue during the remainder of the September contract. The almost always important 20 – weeks SMA is $2.243, the 40 – weeks is just above $2.300 and falling. In between is the zone between the low of week ending 07/12 and the high of the following week ($2.249 – $2.285) which was the terminal point of a rally attempt by then prompt August prompt. It is still August and the Q3 seasonal pressure should be expected to weigh on the gas market.

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First Technical Indication Of a Slight Bias Change

Weekly Continuation

After trading through a previous week’s low in each of the last seven weeks followed by settling lower in seven of the last eight, prompt gas held above the expiration lows of August and then reversed to close higher, which was the first higher weekly close since the Friday before the June high.

While September traded a new contract low (trading through its previous week’s low for the eighth straight week while falling from $3.193 to $1.882, trading as contract prompt it held above the 07/29 low. A reversal higher followed that extended through last week’s high (both on a continuation and contract basis) and did so with a significant increase in volume. September traded an “outside” week reversal. While it did not close above $2.149 (last week’s high) it was close at $2.143.

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Weakness Prevails

Weekly Continuous

August gas fell into expiration as was expected. This makes it the seventh straight month (all of the expiration’s in calendar ’24) the prompt was amply offered into expiration and the fourth of those seven to trade the low of its tenure as prompt coincident with expiration.

New prompt September closed higher for two days after August was off the board, managing to close above some declining trend line resistance, but without volume confirming the recovery with a reversal following with increased volume (and a significant increase in open interest strongly suggesting heightened interest in shorting the new prompt). September traded new contract lows on Thursday and Friday, trading as low as low as $1.920 before ending the week $.084 lower (on a continuation basis prompt gas was .0$39 lower). August’s closing range before recovering raises the technical odds that September will get a shot to finish closing the gap. If September closes below $1.848 then the daily gap comes into focus ($1.628 – $1.85).

On May 1st total open interest was 1,587,270. By June 12th the total had fallen to 1,443,769 allowing for that nearly 150,000 contracts of short covering had been a significant contributor to the June 100%+ rally. Since 06/12 open interest has returned to and this week surpassed the early May high (currently 1,592,601). That total is less than 25,000 contracts below the twin peaks that preceded the February and March lows.

Give the downside momentum created by the multiple weeks decline from the June high, the expected weak expiration of August gas and September trading a new contract low, expect the prompt to be offered lower to close the late April gap. On a weekly continuation basis, the fraction of that gap remaining is between $1.848 and $1.856.

Longer term, these declines and the constant attack at rallies by the bears will lead to a short covering rally similar to what was experienced in early June. Perhaps, that will be the driver for the annual upcoming Q4 run.

Major Support:, $1.848, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.39, $2.44-$$2.502, $2.618, $3.00, $3.16

Is It the Q3 Low

Weekly Continuation

Failure at the conventional and trend line resistance on Monday and again early Tuesday (20 Week SMA) put August on the same track as its predecessor contract months which (as discussed in the Daily) a low volume decline into expiration. With one day left for prompt August before it goes to settlement, technically it does not matter what happens tomorrow unless there is some kind of high volume price surge (regardless of early Sunday night trade). Given that Friday’s close was the lowest daily close since May 1st and the lowest weekly close since prompt May settled at $1.619 on Friday April 26th, the chances of another “amply offered” expiration seem greater.

The bottom line is that prompt gas held a zone of support defined by the March high ($2.009), the mid – April high ($1.943, the high of week ending 04/12) and $1.913, the low of calendar May, as trading for the last week of August’s tenure ended, tenuously. For the first time since just after the “expiration” gap following May going off the board, prompt gas traded sub – $2…to $1.994, and September ain’t far behind ($.045 premium to August).

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