Buoyed by falling temperatures and spiking cash prices, theprompt natural gas futures contract did what has become almostsecond nature for the commodity this year as it rumbled to a newall-time high Tuesday. In fact, after a strong opening, the onlyquestion to be answered was which month (December or January) wouldset a new high watermark.

Nymex made the answer to that question easy when the exchangeraised margins requirements, effective at the close of businessWednesday, to $6,500 from $5,500 for clearing members; $7,150 from$6,050 for members; and $8,775 from $7,425 for customers. Uponlearning yesterday afternoon that margins would be increased,traders transferred December longs to January and February in aneffort to minimize their exposure to a margin call. December etcheda new high of $6.51, but was outperformed by January, which set anew commodity high of $6.52. Both months, however, crumbled at theclose to finish at $6.408 and $6.432 respectively.

Traders were quick to point to snow and sub-freezingtemperatures in many Northeast and Midwest markets as a supportivefactor yesterday. However, those gains were cast in doubt when theNational Weather Service released its latest six- to 10-day weatherforecast. While the weather outside trader’s windows right now isbelow normal, forecasts call for a moderation of temperatures byDec. 1.

According to the NWS, normal mercury readings will be seenacross much of the West, Midwest and Northeast. Above normaltemperatures are expected in Montana, Minnesota and the Dakotas.Meanwhile, below-normal temperatures are forecast for theSoutheastern U.S.

Looking ahead, one would reason that a slightly bearish weatherforecast in a market that is going into a 4-day weekend atstratospheric levels would be a recipe for a sell-off Wednesday.But not so fast, said one Houston-based trader. “Storage is still awildcard, and the market won’t get a chance to react until nextMonday. The market closes at noon (CT) and storage comes out at1:00 PM (CT). Any reaction will have to wait until next week,” hereasoned.

Market expectations for today’s storage report look for a netwithdrawal of between 50 and 100 Bcf to exceed the 20 Bcf drawdownseen last year. Meanwhile, the 5-year average calls for a 52 Bcfdepletion.

Technically speaking, the market is very strong, adds IraHochman a local at Nymex. Through looking at a technical systemcalled Market Profile, Hochman targets the $6.34 level as a keymomentum number that December needs to remain above for him to keephis horns showing. “Above that, everyone is looking for prices togo to $6.61. When you get everyone looking for an upside objectivein any other market it scares me. However, natural (gas) is one ofthose markets where what is expected usually happens.”

According to Hochman, $6.61 is a 50% Fibonacci extension abovethe $5.87 to $4.38 move basis December futures. Also on the radaris the 100% extension at $7.36. Meanwhile, Elliot Wave analysis,which has been pretty sharp on this move up, says Hochman, pointsto $7.20.

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