The screen was back to putting on a spectacular show forwatchers again Monday. It took practically all day to get there,but the July futures contract kept pushing until it eventuallywound up at $4.398, up 35.5 cents on the day and just shy of thefinal June settlement at $4.406.

In addition to the strength shown by July numbers, one traderwas particularly impressed that both the September and Octobercontracts “maxed out to the limit of their allowable 30-cent dailytrading ranges.”

“We’re trading in an area where there are few price referencepoints because of how fast we went up to $4.55,” said Tom Saal ofMiami-based Pioneer Futures. “Then we retraced back down to $3.80,and now we’re zooming up there again.” It was locals doing most ofthe deals early in Monday’s session, he went on, and they pushedthe market higher to $4.23; then the commercials came in and bid itup further to a peak of $4.41 prior to a small bit of lateslippage.

Saal said he’s seen the screen more volatile than now a fewtimes in the past, but traders should get used to frequent dailyshifts of 20 cents or more because of the lofty heights at whichthe market has been perched for a while. “You wouldn’t expect thismuch volatility back when the screen was around $2.00 or so,” hesaid.

Monday’s strength actually started in over-the-counter tradingFriday afternoon, according to a Texas risk manager. Prices went upa dime between that day’s closing and 5 p.m. EDT, he noted.”Initially the market was bearish [Monday] morning, but tradersexhausted any downside potential early on.”

A couple of sources commented on how Monday’s steep rise wasdone in relatively low volumes. “I make a noontime check of tradingvolumes each day and the average is usually around 40,000[contracts] changing hands,” said the above risk manager. “Therewas only about 23,000 today [Monday], so any type of priceconsolidation we were attempting was being done on small volumes.”Volume for the day totalled 40,198.

To him, that meant one of two things: either a lot of people aremixed in their near-term outlook for the natural gas market, ormost of the traders losing money over the previous three days hadbeen in long positions. “The hardest trade to re-initiate is theone you just lost money on, and it makes it harder to get yourmoney back when you’re trying to go long again,” he added.

Considering the big range of Monday’s move higher, there was notmuch trading volume, one futures trader observed. “That created alittle bit of a vacuum, making it easier for fewer traders to pushprices up by large amounts,” he said.

Yesterday’s futures market appeared to be saying the sell-offlate last week was simply a mistake. “There wasn’t any fundamentalreason” for the 30 cent drop Thursday and Friday. It was simplythat “the market hadn’t been tested for some time and some tradersdecided it was time to reach for the cash register,” according toTim Evans with the Pegasus Natgas Report. With Monday’s increasethe market was “really just recovering its nerve.” The fall-back”created a bargain, and traders stepped in.”

Evans believes the market could have gone higher. “It just ranout of time.” One source pegged today’s support level at $4.23 withresistance running “as high as $4.41,” Monday’s peak.

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