Opening near its daily high and closing just off its low, themarket took on the trajectory of a safe pushed out a 10-storybuilding Friday, as traders pressured prices to their lowest levelsince April 12. The June contract was hardest hit late in thesession, when a wave of sell-stops exacerbated the price slide. Theprompt month closed down 8.2 cents at $3.025.

A New York analyst was quick to point to the $3.03-045 chart gapfrom the daily continuation chart that was finally filled on themove lower yesterday as a reason for the price slide. “Once wedropped back below $3.10, you just knew the bears would try for$3.03. It was a no-brainer.” However, another source noted that itwas a lack of buying, and not necessarily selling pressure thatinitiated the price slide Friday. “We opened higher and thingslooked promising, but then there was no buying kick. It was likeall the bulls took an early weekend,” he said.

“Locals were a little long and were forced to liquidatepositions late,” said Ed Kennedy of Miami-based Pioneer Futures.”That triggered sell-stops in the $3.04 area.”

Looking ahead, Kennedy targets June’s 40-day moving average at$2.99 as the “key level” for trading Monday. “If we are able tomove below the 40-day, we could get some immediate selling fromdiscretionary fund managers.” While some funds will wait for asettlement below — or two consecutive days of trading below —the 40-day moving average, Kennedy insists there is a breed of fundmanager, typically with some industry knowledge, with the freedomto trade using a looser set of parameters and a little discretion.

If he is right and funds begin to liquidate longs on a movebelow $2.99, it could mean a lot of selling pressure. According tofresh Commitments of Traders data released Friday by the CommodityFutures Trading Commission, non-commercial traders have increasedtheir net long holding to a whopping 43,601 positions. The lasttime they were that long was back in August, when prices peaked outat $3.13. During that sell-off, prices dipped to a low of $2.08 inlate November.

And if the market continues lower this week, it will not upsetKennedy, who admits being a bear for a couple of months now. “Thereis simply no fundamental justification for these prices. Fools saystorage levels are low this year, but they are comparing it to lastyear instead of the more representative three and five yearaverages.

“Sure, some nukes are down, but they are always down this timeof year. Now they are on their way back up. This week nukes are up4% to 80% utilization.

“Some traders are pointing to private weather forecasts, whichare generally in agreement that this summer will be hotter thannormal. However, they are not reading the whole report. If theykept reading, they would see that these forecasts are calling forit to be cooler than last summer, so demand will actually decreaseyear-on-year.”

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