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Futures: What Can't Go Up Must Come Down

Futures: What Can't Go Up Must Come Down

After three consecutive days marked by the bullish pattern of higher highs and higher lows, the futures market receded yesterday on a wave of selling pressure by both commercial and local traders. June wilted into its daily close, tumbling 8.1 cents lower to finish at $2.262.

Ed Kennedy of Miami-based Pioneer futures said the market's direction was decided early yesterday when bull traders were unable to push above the $2.31 opening price. As it turned out, $2.31 was the high for the session as sellers took control shortly after the opening bell. "A large commercial trader came out as a big seller, and once the market started to move lower locals got religion in a hurry," Kennedy added.

However if the contract is to continue lower, it will have to overcome scale-down buying, which he feels is waiting in the $2.19-20 area. "Industrials were buyers last time the contract dipped down there, and there's nothing to indicate they won't be buyers again," he said.

A Houston marketer was surprised by the market's ability to retrace recent gains on the heels of the latest National Weather Service 6- to 10-day forecast, which calls for above-normal temperatures for most of the country. But according to Fred Gesser of Omaha-based Strategic Weather Services, traders should prepare for warmer weather. In his most recent 30-day forecast, which is consistent with cooler-than-usual waters in the eastern Pacific Ocean, Gesser predicts normal temperatures from Northern New England down the coast and including the Mid-Atlantic states. However, in most other gas-sensitive areas, which include the Great Plains states across into the western Mississippi Valley and the Southeast, he expects to see above-normal mercury readings.

Looking ahead to the American Gas Association Storage report to be released this afternoon, market watchers are doing their own forecasting. The Pegasus Econometric Group of New York looks for a 70 to 90 Bcf refill. Ed Kennedy estimates 82 Bcf will be injected. Last year, the market saw a 92 Bcf build for the week.

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