Following aggressive buying and double-digit increases achievedin Wednesday’s Access trading session, the futures market cooledoff yesterday as physical traders eschewed the opportunity to belong gas at the $2.70 level for the month of August. Once themarket was unable to get past the $2.72 high from Access sellerscame out of the woodwork and demoted the September contract to$2.569, down 3.7 cent for the session.

“This rally is a shark that must keep swimming or it will die,”said Tim Evans of New York-based Thompson Global Markets. “The rideback down can be every bit as strong as the rally.” On thedownside, Evans thinks a break of recent lows in the $2.53-56 rangeis necessary to fully disturb the market’s bullish sentiment.However, sellers might need some help pushing prices lower. Thatcould come as soon as this afternoon when the Commodity FuturesTrading Commission (CFTC) releases a fresh breakdown of theburgeoning open interest in the bi-weekly Commitments of Tradersreport. A Houston risk manager looks for a whopper of a report andexpects that it will show that non-commercial traders, which arelargely comprised of speculative fund groups, have accumulated morelong positions than ever. The current all-time high was notched onJune 15, 1999 when non-commercials were net long more than 51,000in open interest. And if they are once again long by that amount,they will be looking to get out in a hurry, he reasons. “They havebuilt positions between $2.30-65, which means that they areprobably long from a weighed average of around $2.46-50. That willlikely be their bail-out point. $2.50 will provide somepsychological support but if price move below there it will be likea hot knife through butter,” he said.

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