After gapping higher at the open yesterday and reaching as highas $1.915/MMBtu during the day, the April contract was able tomanage only a small 0.6-cent gain for the day, telling someobservers the contract has lost its vigor after the rapid 22.5-centclimb last week. April opened at $1.905, up significantly fromFriday’s settle of $1.853, but it lost steam at $1.92 during themorning and fell back to about $1.86. During afternoon trading, thecontract bounced back up to $1.90 before falling back down to fillthe gap and close the day at $1.859.

“That says to me this has been a corrective rally in thelong-term scheme of things,” said Tim Evans of Pegasus EconometricGroup. “It is being led by [technicals]. The cash market is comingup too but it’s reacting to what Nymex is doing rather than[relying on fundamentals].”

Another analyst agreed, saying the faltering April contractproved futures are going through an upward correction rather thanthe start of a new bull market. The minor gain yesterday doesn’tmean the “market is going to fall apart here,” he said, “but itdoes say to me that the $1.92 high we set this morning probably issignificant resistance and we need some price consolidation. I sortof want to see that because I would be afraid to buy a break to anew high right now. The market right now, at least on a short-termbasis, is overbought.”

Last week’s rally was in part a reaction to the large net-shortposition of speculative fund groups, as reported in the CFTC’sCommittment of Traders report on Feb. 26. Open interest yesterdayafternoon was 276,979, not far from the all-time high of 287,774but down from last week, which shows some liquidation is takingplace. One cash trader noted the market still seems poised for amajor correction, “but in which direction?” It’s becoming a coldMarch, particularly in the Midwest and Northeast, which couldreduce the storage surplus significantly. However, last March alsowas colder than normal, and the storage withdrawal during thecorresponding week last year was 143 Bcf. Such a large number willbe tough to beat this week, Evans noted. Some observers have beenexpecting a rally similar to the one last March, when thenear-month contract rose 65 cents in four weeks, but this year’sstorage surplus is likely to disappoint them, he added.

Evans sees resistance at $1.93, which was set on Jan. 21, andthen at $1.94. “After that we get to start talking about numbersthat start with a two,” which he believes would be quite a stretch.Major support exists at the 40-day moving average at $1.802.

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