$2.70 September Futures? Not So Fast
Following aggressive buying and double-digit increases achieved
in Wednesday's Access trading session, the futures market cooled
off yesterday as physical traders eschewed the opportunity to be
long gas at the $2.70 level for the month of August. Once the
market was unable to get past the $2.72 high from Access sellers
came out of the woodwork and demoted the September contract to
$2.569, down 3.7 cent for the session.
"This rally is a shark that must keep swimming or it will die,"
said Tim Evans of New York-based Thompson Global Markets. "The ride
back down can be every bit as strong as the rally." On the
downside, Evans thinks a break of recent lows in the $2.53-56 range
is necessary to fully disturb the market's bullish sentiment.
However, sellers might need some help pushing prices lower. That
could come as soon as this afternoon when the Commodity Futures
Trading Commission (CFTC) releases a fresh breakdown of the
burgeoning open interest in the bi-weekly Commitments of Traders
report. A Houston risk manager looks for a whopper of a report and
expects that it will show that non-commercial traders, which are
largely comprised of speculative fund groups, have accumulated more
long positions than ever. The current all-time high was notched on
June 15, 1999 when non-commercials were net long more than 51,000
in open interest. And if they are once again long by that amount,
they will be looking to get out in a hurry, he reasons. "They have
built positions between $2.30-65, which means that they are
probably long from a weighed average of around $2.46-50. That will
likely be their bail-out point. $2.50 will provide some
psychological support but if price move below there it will be like
a hot knife through butter," he said.
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