Category: Weekly Detail

Going To Keep Testing Lows

Weekly Continuous

The weight of the seasonal pressure that has been discussed and warned about since before the rally to the June Q2 high, fell on soon to expire August. A year ago, the seasonal descent was more orderly after the June Q2 ’24 high (week ending 06/14) prompt gas declined for six of seven weeks (falling from $3.159 to $1.856, or 41.2%). At the time the weekly ATR was .324. By the time a rally began to gain momentum, following an August test of the July low, the ATR had fallen to .268.

This is another example in natural gas that history does not repeat itself, but some times it rhymes. Since the June ’25 Q2 high (week ending 06/20, a few days after the anniversary of the high) the decline has been far more erratic. Just last week August closed at its highs gaining $.125(and was well – bid in the aftermarket. Volatility, still elevated by historic standards, is $.466/dt/week (+/- 40% higher).

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Trade Looks to the Low Side of August Range

Weekly Continuous

This week’s report is going to be short as I am taking my dog to the emergency vet service. Over the history of August contracts there have been a few that the late summer contract rallied for most of its tenure and was bid into expiration, ‘21 and ’22 are the most recent examples. In both of those years prompt gas set a calendar August high before falling. There have been a few that steadily weakened, ’17 and ’18 are examples. In both of those years prompt gas made a late July/early August low before a significant rally.

More often than not, August follows a pattern of trading a post – 4th low, a mid – July high followed by weakening to a low either side of 7/23 – 7/25.Look for August ’25 is conforming to that seasonal pattern. The 07/09 undercut of the June low ($3.199 on 06/26 ) was on far and away highest volume traded since then.

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Expectations Met

Weekly Continuous

I wrote last week —The expectation was the decline to occur on either 07/07 or 08. Instead, August fell $.458 (12.2%) on 06/30 and 07/01…closing the gap and trading just through the low of the first targeted support band ($3.300 – $3.350). Well the declines continued to July 9th and promptly met the expectations for the size of the declines (in fact exceeded them). Once the low was set, prices bounced and returned to with in the range for the July contract and now seemingly the August contract. Folks, this market seems to being going nowhere and at a slow pace.

Understanding the frustration of many of you (for volatility– myself included) but my ideas are to highlight what I see the market is trying to accomplish and clue you in advance of the movement– unfortunately this market is showing no movement beyond the range each successive contract trades within. There may be an occasional lapse in Daily diatribes during these periods.

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Seasonal Declines Per History

Weekly Continuous

Price action conformed to the historical norms (for the most part) though, last week, I Thought that a 14% decline would more than close the 06/27 gap and test well defined conventional support. The expectation was the decline to occur on either 07/07 or 08. Instead, August fell $.458 (12.2%) on 06/30 and 07/01…closing the gap and trading just through the low of the first targeted support band ($3.300 – $3.350).

It is not unprecedented for a low to trade before the holiday trading break. In ’19 a low was traded on 07/01 before a rally to a mid – July high. In ’13 before a similar rally but there was a minor decline from an 07/03 high to a 07/05 low ($3.700 to $3.577). Both of those pre – holiday lows were later substantially violated during the initial days of the tenure of prompt September.

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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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