Buoyed by another day of strong demand in the physical market,the futures market trended higher Friday in a choppy, range-boundtrading session. After opening just two pennies above Thursday’slow of $2.67, the September contract rumbled 2.2 cents higher onthe day to finish at $2.745.

A Gulf marketer was impressed by the cash market’s ability tosuffer only minor losses heading into the weekend and feels thatthe futures market fed off that apparent strength Friday. “[Themarket] saw a few false breakouts to the downside this week, but aslong as cash prices stay rich, futures will continue to build agood foundation in the $2.70-80 area. And the longer the markettrades in that area, the greater chance it has of moving to theupside,” he reasoned.

What will it take to promote the market past prior highs at$2.785? “A fundamental event”, the trader continued. “If we get a[tropical] storm, or another bullish weather forecast, or even anuclear plant outage this thing could move higher in a hurry.”

But in order for prices to continue higher there has to bestrong buying support and according to the latest Commitments ofTraders report, that may difficult for at least one segment of themarket. According to the Commodity Futures Trading Commission,non-commercials, which are comprised of institutional moneymanagers, local traders, and speculators, have increased their netlongs more than 15,000 to 49,931 as of August 10, 1999. That figureis slightly less than the all-time high net-long position of 51,036set in June.

“They could still add to their positions and take the markethigher, but I wouldn’t count on it,” a Houston risk manageroffered. “There are only 10 trading days left in the Septembercontract and therefore I would expect them to start liquidating orrolling those positions.”

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