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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