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Bears Exert Their Influence; Repeal Early Advance
After failing to sustain a fresh 10-day high notched yesterday morning, natural gas futures tumbled lower Monday as traders once again eschewed the long side of the market for more than a couple hours. The prompt August contract finished at $3.153, 6.5 cents lower for the day and 18.2 cents off its high water mark for the session. The losses were also seen in the out months, which, for the most part, experienced more severe losses. The winter strip declined 8.1 cents to $3.867 and the 12-month strip dropped a cool 8 cents to $3.619.
Despite yesterday’s price erosion, a risk manager was quick to point to the market’s propensity lately to surge higher early in the week only to sell off Wednesday as fresh storage data is digested. The numbers speak for themselves. Heading into this week, the prompt month has fallen 66.2 cents over the last 5 Wednesdays while actually gaining a cumulative 8.1 cents and 2.2 cents on the Mondays and Tuesdays preceding. “If the market is true to form, it will inch higher [Tuesday] only to crumble under the weight of another bear pill Wednesday,” he said.
However, it may be difficult for the market to notch a gain Tuesday following a “complete and utter failure” to sustain a move to new week-and-a-half highs. “What we saw today was a new high failure. We screamed higher on the open, only to have the sellers step in and send this thing right back down. This proves that while there are those willing to bid up the market, they are not willing to go home with a long position for even one night. It was that profit taking that sent us lower [Monday],” he reasoned.
Also of influence thus far this month, are Gulf Coast first-of-month indices, which have acted like a homing beacon for the futures market. Each time the August contract has approached a dime premium to the Henry Hub July index of $3.12, it has been pulled right back into line. Since becoming prompt month on June 27, the August contract has closed at $3.28, $3.096, $3.117, $3.201, $3.136, $3.218, and $3.153. Traders agree that unless fundamentals change, it will be difficult to press the August contract very far to either side.
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