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Futures Tug-of-War Favors Bulls Again

Futures Tug-of-War Favors Bulls Again

The futures market continued higher Friday, but it was not without a struggle when morning short-covering was followed by a brief, but spirited, long liquidation early in the afternoon. However, that dip in prices paved the way for another round of "bargain buying" as some fresh longs were seen entering the fray. And just as the case has been almost the entire week, it was bulls that ended up on top Friday, with April finishing at $1.854, up 1.9 cents for the day and 15.5 cents for the week.

Looking at the latest Commitment of Traders report released Friday by the Commodity Futures Trading Comission, Tom Saal says we can gain insight as to who were the winners and losers in the move higher. Commercial and non-commercial traders were net short 21,157 positions as of last Tuesday and since that time the April contract has moved a dime higher. "Looks like large traders all got on one side of the boat and then it flipped," he quipped. And who was the winner? "The small trader appeared to be on the right side-at least this week," Saal concluded.

But that begs the question as to whether the small trader will still be on the right side of dealings Monday afternoon when the curtain is drawn on the April contract. And Saal feels that we can expect more of what we saw on Friday-waves of long liquidation, interspersed with continued short covering. "Ultimately the settlement price will be decided based on the level traders are willing to make or take delivery. At what level are they willing to be long or short physical gas for the month of April," Saal reasoned. "We're looking for April to probably end up on a higher note again Monday."

A Houston marketer pegs the $1.68-69 level as the price he would be comfortably long for the month, adding that the downside potential of this market still makes him very nervous. "On the other side, I think you'd be a fool not to sell $1.90s," he concluded.

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