Daily Call

The uptrend that first began following the June ’20 low, was conclusively ended when the calendar December close for prompt gas was below the trend line drawn from that multi – year low and the December ’21 low (See Monthly Continuation chart above). That does not mean that the gas market is headed to zero or even back to test the last multi – year low, but the downside momentum that began to be generated by the bearish momentum divergences that accompanied the August high is likely to take some time to be completely neutralized. While it may not seem so, price volatility has actually decreased…the weekly ATR (the average range of the last fifteen weeks) has fallen from $1.413 on 07/29 to $1.091, over the last few weeks from $1.155. This week’s range was $.874 the narrowest since mid – November.

That said, a volatile rally is overdue. Over the last four weeks since the seasonal early – mid December high on 12/13, prompt gas has fallen from $7.105 to $3.520 (over 50%). In the process the gas market has finally reached an extremely oversold technical level. The weekly RSI ended the week at 24.29 that has the “leading” indicator, lower than that for one week during October, which was followed by a weekly reversal and a rally from $4.750 to $7.604.

The warming weather trends last week took prices down to test levels of support that have not occurred since a year ago. As discussed last week the market has a tendency to develop a key level around the 1st of January.

…late December/early January highs or lows have consistently been disproportionately important going forward into each new year.

Follow through buying took the prompt to $7.058 before a reversal lower. Another one on Tuesday in the opposite direction set the week’s high at $7.105 testing the resistance from the intersection of the 20 – week SMA and the still rising 40 – week SMA. From those levels, prices immediately retraced and closed the gap from Monday and closed the week in the middle of the range.

The results left prompt January $.355 higher, but examination of individual monthly gains in the winter prices, showed an interesting divergence. Weekly gains of February were over $.20 except for March. Sandwiched between February’s + $.221 and April’s +$.229 was March at +$.037. Chances are (guesses really) are that difference was a result of substantial buying of January and February while simultaneously selling March– sometimes referred to as a near – term bull spread. Building length in the remaining winter while offsetting that length in March. With strong volume in that spreading would indicate that folks are expecting additional winter strength in early 2023.