Technical analysis was originated by Charles Dow in the late1800s as an attempt to interpret recurring historical pricemovements displayed by a group of stocks, which have since evolvedinto today’s Dow Jones Industrial Average. He would have been proudof the natural gas futures market last week. For four days the Maycontract ebbed and flowed within a 10-cent trading range until itbroke higher Friday in a technical buying spree. But as if it werefollowing the same script rehearsed during the prior two tradingdays, the May contract couldn’t hold onto its gains Friday,releasing them in the form of profit taking ahead of the weekend.The May contract capped the week with a 2.7-cent advance to $2.096after notching a $2.15 high.

“Everyone was looking for confirmation that the rally in [theThursday evening] Access session was legitimate. As soon as themarket opened at $2.11 [Friday], the floodgates of buying wereopened,” a Houston trader said. Another trader, however, wassurprised the market was unable to sustain the momentum to fill inthe November chart gap up to $2.17 Friday.

A Gulf Coast marketer agreed that the market was verytechnically driven last week, adding that fundamentally all thestars were lined up. “Weather was cooperative, marketing companiesare still short and utilities were buying gas to inject intostorage.”

Several other traders pointed to forecasts calling forbelow-normal temperatures this week as a supportive factor. OnFriday the National Weather Service released its latest six- to10-day weather outlook, which calls for below and much below normaltemperatures in the eastern half of the nation the latter part ofthis week.

“It’s like somebody reversed the slide on the overheadprojector,” said Tim Evans, of New York-based Pegasus EconometricGroup, referring to the expected flip-flop in temperatures thisweek. “[Last] week it was the West that was cold and the East thatwas warm.” However, he feels that in the end the market will focuson whatever part of the country fits its argument, which in thiscase is the East and the expected cold.

But weather was not the only morsel of fundamental data analystswere able to sink their teeth into last Friday. The CommodityFutures Trading Commission (CFTC) released its latest Commitment ofTrader (COT) report, proving what many had suspected-speculatorshad completely reversed their short position and gotten on the longside of the market. As of April 6, non-commercial traders were netlong 15,739 positions, compared with a net short position of 12,865held just two weeks prior.

And the last time the speculators were that long? April 1998,when prices rallied to a high of $2.725 the same week the CFTCreported non-commericials were long more than 35,000 positions.”It’s deja-vu all over again,” quipped Evans.

He added that barring a quick reversal, the market willeventually form a broad distribution style top. “The trick is notto try and be a hero and pick a top too early. Wait until the fundsare done buying before you sell, or else you will be selling intotheir rally.”

He continued, offering two ways to time the market. “You couldback off and look at a weekly chart. Weekly charts have picked areliable top four out of the last five times.” Alternatively, Evanssays you can look at the hourly chart, not be too hasty and “gowith the flow.”

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