May Futures Make a Brief Visit Above $2.00
For the second day in a row, the futures market raced off to a
fast start as steady buying bolstered prices to their highest mark
since December. But in contrast to Tuesday's price action, which
featured the May contract finishing near its daily high,
Wednesday's rally ran into heavy overhead selling that trimmed
those gains into the close. May finished up 3.5 cents to $2.013,
after notching a $2.07 high.
Sources maintained that technical factors were once again at the
heart of the rally. One trader saw a flurry of buying interest as
the May contract worked above the 200-day moving average at $2.015
Wednesday. He remains bullish in the intermediate- to long-term but
warns that markets rarely move in straight lines. "I fully expected
this afternoon's pullback. We flirted with but couldn't break above
several significant levels of resistance this morning. If we settle
in the lower half of the [Wednesday's] trading range, prices will
likely continue lower into the weekend," he said with still an hour
left in yesterday's session. And by early yesterday evening his
prognostication was looking spot on. After settling in the lower
half of its range, the May contract continued 3.8-cents lower to
$1.975 in last night's Access trading session.
Tim Evans of New York-based Pegasus Econometric Group added that
while there is no strong fundamental reason for the push to higher
prices, the influence of sentiment swings cannot be discounted.
"However, you have to be careful, because those swings can be very
fickle and leave the market vulnerable to a reversal."
But it was difficult for traders to look past fundamental
factors yesterday evening when the National Weather Service (NWS)
and the American Gas Association (AGA) released their reports. The
NWS six- to 10-day forecast calls for normal and below-normal
temperatures to be confined to areas west of the Rockies. The
remaining three-fourths of the country is expected to see
above-normal temperatures, the NWS said.
And if that wasn't enough salt in bulls wounds, the AGA added
some more when they announced that only 37 Bcf was withdrawn from
underground storage facilities last week. Although that figure was
more than the 20 Bcf for the same period last year, it fell short
of the 40-70 Bcf expected.
While those reports certainly took the wind out of bulls' sails
Wednesday, Evans thinks the question of whether the rebound is dead
is still open to debate. "It depends on whether funds stick with
and continue to build to their long positions or head for the
exits. We could continue to see weakness into next week as buyers
take a wait-and-see position."
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