Ding-dong the downtrend is dead. Well maybe its not dead quiteyet, but it certainly was dealt a potentially fatal blow yesterdaywhen short-covering by funds quickly turned into a buyingfree-for-all as commercials and locals entered the fray. The Augustcontract finished at $2.395, up 14.2 cents for the day. Nearly asimpressive as the price action was estimated volume, whichregistered 113,049 contracts.

Several traders were at a loss to explain the upward surgeThursday following what many felt was a “disappointing” storagereport released Wednesday night. According to the American GasAssociation 78 Bcf of gas was injected into the ground for the weekending July 16. And although that figure was even with the 79 Bcfrefill seen a year ago, it paled in comparison with marketexpectations, which centered on a 55-75 Bcf figure. However,shortly after the AGA released potentially bearish news, theNational Weather Service countered with some price constructiveinformation. In the six- to 10-day forecast the NWS expects above-and much-above normal temperatures next week for nearly half of thecountry from the Northern Plains eastward, including the upper Ohioand Mississippi River Valleys, the Mid-Atlantic and Northeast.

Those contrasting fundamental factors left the market in aquandary Thursday. It was either trend lower in reaction to storageor move higher in anticipation of continued hot weather. As isoften the case, futures lived up to its name yesterday and sidedwith the weather going forward.

Can the market continue to add to its winnings ahead of theweekend? Not according to Thompson Global Markets, which feels thatthe market may be overbought and therefore needs to consolidatebefore trying a retest of the $2.495 peak from July.

“A tenuous position,” adds Tom Saal of Miami-based PioneerFutures in an attempt to explain the current price level, which isflirting with a settlement above the long-standing downtrend on theweekly continuation bar charts. “Everyone on the floor was talkingabout it today. If we settle above $2.35 [Friday] we will havebroken out of the downtrend,” he advised. And just how long hasthis downtrend been around? Since the week ending Dec. 20, 1996when the January 1997 contract notched a high price of $4.60. Ifyou draw a line from there down to the November 1997 contract highof $3.80 and extend it to today, $2.35 is your number. We have beenflirting with the downtrend for 4-6 weeks now, but have not beenable to settle above it on a Friday.”

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