Daily Call

Market Gains Continue– Overbought Levels

Daily Continuous with RSI

As most of you know, one of the tools I use to judge the condition of the market is the Relative Strength Index (RSI) a “momentum” indicator. When the calculation climbs above 80 (currently calculation is over 87), the market is characterized as being in the extreme over bought area. Looking at the chart above –notice that when the market hit the extreme zone in Oct ’23 and Jan ’24 there was a correction lower in the near term. Expect similar behavior with this current situation. The historical weakness around the holiday and the expiration coming — it would be prudent to expect a slight correction.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance:
$2.46, $2.67, $2.844

Price Action Closes Above Key Averages

Weekly Continuous

For several weeks the possibility/likelihood of a short covering rally similar to the December/early January rally has been discussed here. This past week’s trade is what a short covering rally looks like. The surprise was that open interest actually increased from Thursday through Thursday (remember that reporting of open interest statistics lags one day). Remember that when a contract is bought to “cover” one previously sold short open interest is reduced by one contract. Rather than falling, the total increased by 519 contracts and if the exchange’s estimate for Friday is anywhere accurate that total was reduced by 287 contracts…an addition of 232 contracts over six trading days when prompt gas gained $.325 on a daily closing basis. This would lead to the logical conclusion that at least an equal number of new contracts were bought to those bought to cover an existing short position…that combination of buying pushed the bid steadily higher, and is when all is said and done, a technical positive.

From its contract low on 04/15 $1.907, June gas has rallied .747 or 39%. The rally from mid – April through Friday’s close is the largest increase in a prompt June contract of the last ten years, but only slightly larger than the ’23 rally ($.654, 32.2%) that peaked at $2.685 on 05/19. As surprising as the extent of the rally from the May low may be, it is still not all that different from a year ago.

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Short Term Range Happening

Daily Continuation

It’s only a couple of days since last week– but there seems to be a mini-range developing in the June trade between $2.20 – $2.40. Continue to play that until the market tells you that is over.

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Consolidation Begets Small Rally

Weekly Continuation

The consolidation pattern that permeated the market for the last two months (with slight advances) has developed a solid base for the summer. June reversed higher from support and ended the week strong (above the March/April highs, the continuation 20 – week SMA (for the first time since the January high and the historically important January low). The rally was extended toward resistance defined by the December low, 38.2% retracement of the decline from the January high to the March Q I low and the wide “expiration” gap left following February expiration. For three days June traded around that resistance, each day finding support at the upper boundary of the trading range that June defined between mid – March and the beginning of May. On Thursday the prompt reversed higher from that support and traded to the highest price since late January (with strong volume (the highest daily turnover since 02/21).

June settled back from a higher high on Friday, $2.344, to end the week at $2.252 (the highest weekly close since 01/26), still well short of closing the aforementioned “expiration” gap (a fraction of which remains open between $2.344 and $2.411) and 50% retracement of the Q I decline ($2.437). Given increasing volume and what appears to be relatively modest short covering there is a significant likelihood that June won’t turn back down until the resistance above is seriously challenged.

To read The Daily Call you must be a subscriber (Current members sign in here. ) Start your subscription today.

Additional Bites Into Gap

Daily Continuous

The rally continued after the storage release with prices testing near term support only to rally and bite into the gap from January. Playing with length seems to be profitable – but care and respect should be given to the gap closing– should it occur. The bias continues to confirm the change but time will tell and the weekly close should provide my more information.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.168-$2.411 (gap)
, $2.26