Cautious selling was met with light, scale-down buying pressureat the New York Mercantile Exchange Friday. And when the dust hadcleared and all the orders counted, both bulls and bears couldglean something positive from the session. Bulls were quick topoint to the $2.225 settlement, a 0.7-cent advance for the day.Bears, on the other hand, touted Friday’s lower high and lower lowas an indication the downtrend was still intact. Estimated volumeof 77,538 confirmed the heavy activity in the pit.

There are widely divergent perspectives on the likely directionof the June contract heading towards expiration this Wednesday.Susannah Hardesty of Indiana-based Energy Research and Trading Inc.remains bullish on weather, storage and outstanding commercialshort positions. While she doesn’t rule out a breakout above the$2.40 level if commercial traders are forced to cover in anexpiration-day short squeeze, she feels a June settlement in the$2.33-385 area is more likely.

What is the rationale for her prediction? Bullish Juneexpirations in 1995, 1996 and 1997, which were all preceded by anupward move followed by a congestion or topping-out phase. “In allprior cases prices moved higher in the final four trading days andhave made a final settlement near the top end of the consolidationband, but have not broken out to new highs,” she said.

However, Tom Saal of Miami-based Pioneer Futures feels priceshave a fair chance of moving lower in the near term. The 40-daymoving average for the July contract, Saal argues, is a potentialflashpoint for this market. “If we get a settlement below it, longliquidation by funds likely will propel the market down to the$2.10 level without too much problem.” The 40-day moving averagefor the July contract was $2.219 on Friday.

But is the non-commercial segment of the market ready to takeprofits? According to Saal, it is. He points to the Commitments ofTraders report released Friday, which showed that non-commercial or”fund” accounts have decreased their net long positions from 48,029to 40,109 in the last two weeks. “That confirms that funds havealready been liquidating positions on the sell-off since thebeginning of May,” he said.

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