Two wrongs do not make a right, but they do make for somevolatility in the natural gas pit. Since December’s precipitousclimb to $6.32 last week, the prompt month has vacillated wildly— first lower and then higher, prompting traders to suggest thosemoves were a little bit overdone. However, last Wednesday’s movehigher received some validation Friday when prices bounced offsupport and erupted higher to once again close in the $6-plus pricestratosphere. After trading within a wide, half-dollar tradingrange, the December contract finished the week strongly, up 30.2cents at $6.10.

After watching the market tumble lower Thursday, traders werefocused on support in the $5.60 area Friday. While nearly alltraders expected the $5.60 level to be tested, they were divided asto whether it would hold. A break lower and prices could continueanother 20-30 cents lower while a bounce could promote priceshigher by about the same amount. As it turns out, support at $5.60held, and prices bounced higher, but rather than retracing 20 or 30cents higher like some predicted, the market exploded 50 centsFriday.

“This market remains in a bull trend and because of that, eachpiece of bullish news is amplified while bearish news issuppressed,” said Tom Saal of Miami-based Pioneer Futures. OnFriday, the bullishness stemmed from a supply squeeze in Californiathat sent physical prices spiraling above the $10.00 mark. “Thismarket continues to defy gravity. We saw good buying at the $5.60level [Friday]. Once the market began to creep higher, commercialtraders took it right back up. Then, once prices hit $6, fundsre-entered the market.”

Looking ahead, Susannah Hardesty of Indiana-based EnergyResearch and Trading expects the market will reach its secondwinter high on a move to the $6.50-7.50 range before the expirationof the December contract on Nov. 28. Because of that, sherecommends that sellers lock in 50% of their requirements on a moveabove $6.20. “The remainder of selling will be recommended whenthere are signs of technical topping action along with signs ofbearish weather patterns in the eastern half of the U.S.”

According to the latest six- to 10-day forecast released by theNational Weather Service, below-normal temperatures are expectedacross the entire eastern third of the country through Nov. 27.Temperatures in the West, however, are forecast to be mixed, withabove normal temperatures in the northern Plains, and below-normaltemperatures for east of California markets.

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