Futures Finish Week on Positive Note
It was business as usual last week at the New York Mercantile
Exchange as the market continued its tug of war, pitting storage
bears against bottom-seeking bulls. And just as the case has been
since the middle of 1998 when the downtrend began, it was the bears
who were dominant, pulling optimistic buyers dangerously close to
the mud in the middle. But just when even the most time-weathered
bulls were ready let go of the rope, the market managed to fumble
higher in lethargic Friday afternoon trading. The April contract
finished up 1.2 cents for the day at $1.699.
However, Friday's anemic estimated volume of just 34,580 and
lack of volatility gave traders the opportunity to speculate on
what the market may do this week. The Pegasus Econometric Group of
New York thinks the current mixture of fundamentals and technicals
needs to be sorted out before a reliable trend can develop.
"Storage data for last week was basically neutral; draws were more
than expected but less than a year ago. The weather this week has
been warm, but has also been discounted," the group wrote in its
March 19, 1999 Natural Gas Report.
And Tom Saal, of Miami-based Pioneer Futures agreed that futures
are in the process of groping for fair value. "The market is in a
transitional stage right now between the [storage] withdrawal and
injection cycles. Fundamentally we are very balanced." Saal
continued by adding that the natural gas could be setting itself up
for more losses. "Funds started to rebuild some of their short
positions [last] Monday and Thursday. They will be the aggressive
sellers if April makes new lows on Monday." However, he counters
that technical scenario with a more constructive fundamental one.
"If the weather does not begin to moderate into the month of April,
then we will be in an interesting situation with both [storage]
injections and withdrawals going on at the same time."
Moderating temperatures is exactly what the National Weather
Service (NWS) is calling for. In the latest six- to 10-day forecast
released Friday, the NWS looks for above-normal temperatures to
cover a huge U shaped swath from Idaho; down across northern Texas;
and back up to, and including, northern New England. Normal
temperatures are expected in New Mexico and the Mid-Atlantic
states, leaving the West Coast and parts of the southeast as the
only areas with below-normal readings.
In daily technicals Pegasus sees support at $1.67 ahead of the
contract low of $1.625. Resistance resides at $1.77.
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