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Futures: Buy the Rumor, Sell the Refill

Futures: Buy the Rumor, Sell the Refill

After a lower open at the bell yesterday, the futures market moved higher and easily recouped Tuesday's losses. The July contract finished up 6.7 cents and in doing so registered an outside up-day on the daily charts.

And while commercial and local traders were seen as buyers, Ed Kennedy of Miami-based Pioneer Futures believes the entire energy complex received an unexpected buying push from inflationary hedge funds that have been conspicuously absent from the futures market recently. "Fears about interest rates are resurfacing and that is prompting these money managers to once again look to hedge away the risk of inflation by buying the commodities that make up the CRB," he said. Natural gas was added to the basket of commodities tracked by the Commodity Research Bureau (CRB) four years ago.

Inflationary concerns, however, were not the only bullish factors yesterday. One Gulf Coast trader felt Wednesday's strength was a bit of bullish optimism ahead of yesterday's storage report. But when the storage figures were released last night by the American Gas Association (AGA), "optimism" and "bullish" could no longer be used in the same sentence. The AGA said that 91 Bcf was injected for the week ending June 4. That represents the first time since the beginning of April that the 1999 refill was greater than the corresponding weekly build from 1998. Total estimated working gas in storage is now 1,794, which is 41 Bcf more than at the same time last year. The market was quick to digest the news in yesterday's after-hours Access trading session where the July contract tumbled 3 cents lower to $2.43 by 6:15 P.M.

Looking ahead, Kennedy looks for the bulls and the bears to draw a line in the sand at $2.36. Above that level he sees limit-buy orders that will likely prop up the market. However, a break below $2.36 would trigger sell stops that "could propel the market and additional 5 to 8 cents lower in a hurry.

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