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Initial Futures 'Head Fake' Higher Fools Nobody

Initial Futures 'Head Fake' Higher Fools Nobody

After an early attempt to take out prior highs was rebuffed yesterday, natural gas futures trickled down to easily establish a new low for the week at $2.19. Bears were egged on by a number of factors, which include a rapidly deteriorating technical picture and expected weekend physical demand fall-off, sources agreed. The June contract finished at $2.218, down 3.6 cents for the day.

Locals, led by Sandy Trot, were aggressive buyers at the opening bell yesterday, several traders told NGI. "The market was well bid at $2.285, and you could just tell they were gunning for a breakout above the $2.30 level," a Gulf trader explained. However, he added the problem with "going for the gusto" is that if you fail you have a large position to defend. And yesterday was not the day for the bulls because once the initial buying dried up around $2.29, a bearish combination of mild weather and spiraling crude oil futures pressured the market lower. But whereas natural gas seemed eager to trend lower in sympathy with crude, it was not willing to also follow crude oil futures higher in late, expiration-day short covering.

Looking ahead to today, many traders are eager for the release of the bi-weekly Commodity Futures Trading Commission Commitments of Traders Report, which breaks down all the open positions held in the futures market. A Houston marketer looks for both non-commercial and commercial traders to have reduced the size of their positions since the last report. The last report, which was released May 7, showed non-commercials were net long over 48,000 contracts while commercial traders more than offset that by holding over 74,000 net short positions.

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