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Bullish Hype Fizzles, Leaves Market to Trend Lower

Bullish Hype Fizzles, Leaves Market to Trend Lower

Perched at recent highs and just below contract resistance at $2.19, the May contract was poised to continue higher yesterday. And after opening at $2.17 local buying pushed prices to $2.189 in choppy trading. But despite the bullish euphoria the market had before the open, locals received little help from other market segments early yesterday and were forced to cover their long positions Tuesday afternoon. The resultant sell-off left the prompt month down 2.5 cents to $2.144.

A Gulf marketer was not surprised by the market's decline, adding that it had been caught in a $2.08-18 trading range for a while now. "The higher the market goes, fewer and fewer people are willing to get on the long side it. Funds are long, but they are long from $2.10-15. The question that still remains is who is going to push the market higher?"

The Pegasus Econometric Group of New York, on the other hand, takes a more fundamental approach. The group points to weather and storage factors, which they think will have to be sorted out before the market can move outside its recent trading range. "The [National Weather Service six- to 10-day] outlook remains mixed in our view, with below normal temperatures in the South offsetting cooling demand in the West. We're expecting 30-40 bcf in the [American Gas Association storage] refills to be mildly supportive relative to last year's 54 bcf tally." On balance they feel that the market may have missed its chance to continue higher, and a break back under $2.14 would put the May contract on the defensive.

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