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May Futures Make a Brief Visit Above $2.00

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And if that wasn't enough salt in bulls wounds, the AGA added some more when they announced that only 37 Bcf was withdrawn from underground storage facilities last week.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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