The Bulls Never Had a Chance
After being hit with a devastating combination of bearish news
Friday afternoon and Monday morning, traders at the New York
Mercantile Exchange had little choice when the market reopened. The
July contract took it on the chin, gapping lower on the open before
posting a 7.1-cent decline to finish at $2.237. The August contract
did not fare any better, slipping 6.9 cents to $2.268. Estimated
volume was solid with 78,116 contracts changing hands.
Traders were quick to point to "disappointing" six- to 10-day
weather forecasts released by both the National Weather Service and
private entities as a major reason for the decline. "There was talk
late last week of a dome of high pressure expected to build over
the Midcontinent and Midwest that would keep things hot. Now it
looks like seasonal temperatures and even some rain relief is in
the forecast," one trader said.
While the National Weather Service expects above normal
temperatures for much of the upper Midwest and Northeast, it also
looks for areas of below normal temperatures in the Southeast and
over a large area of the West.
"The large electrics, sensing demand is not going to be what
they had anticipated, came out as heavy sellers in the OTC market
[Monday]. Then once the futures market opened locals added to the
downward pressure and in the process became very short," another
However, the weather was not the only thing on traders' radar
yesterday. Several sources said they were becoming increasingly
concerned with the large speculative long position held by the
non-commercial segment of the market. In its Commitments of Traders
report released Friday, the Commodity Futures Trading Commission
reported that the non-commercial segment of the market was long
over 51,000 as of last Tuesday. "Now that the market has moved back
below the 40-day moving average, it is likely they will start to
liquidate those positions," a New Jersey analyst noted.
What will it take to arrest the latest sell-off? Scale down
buying by trade paper, who will be eager to pick up length below
$2.20, a Houston trader said.
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