Natural gas futures joined a number of commodities on Monday in shooting higher in morning trade only to come off with the same ferocity in the afternoon. April natural gas recorded a high of $9.595 before crashing back to earth to close at $9.346, down two pennies from Friday’s close.

“Everything really formed a parabola on the day with the exception of crude and heating oil for the most part,” said a Washington, DC-based broker. “Commodities took off in the morning, roofed in the middle of the day and then gave it mostly back at the end. I suspect that April natural gas futures were up on ‘nothing’ in the morning and came down on the same ‘nothing’ in the afternoon. Maybe some traders in the East stuck their heads out their window on Monday afternoon and felt the 60- to 70-degree temperatures and said, ‘Wait a second, what is this 30-cent rally all about?'”

April crude once again recorded a new all-time high during Monday’s regular session. The contract peaked at $103.90/bbl before closing out the day at $102.45/bbl, up 61 cents from Friday’s close.

“There was saber-rattling talk about Iran with sanctions and security council being mentioned,” the broker said. “I don’t know if that was why oil was up in the morning because it seemed to me those headlines came out more during the middle of the day.”

Back to natural gas, the broker said Monday’s run-up to nearly $9.600 gave the market some new information. “The surge of money that could come in and be buyers got it up to $9.600, so the next test is getting through and settling above $9.600. The next resistance is certainly at that level because we chopped around that area for most of the afternoon. While it wasn’t necessarily done on large volume, it definitely sets the target out there.”

The broker noted that traders are definitely monitoring the funds. “There was a story out there late last week about CalPers [California Public Employees’ Retirement System], which officially changed their asset allocation from 0.5% in commodities to 3%. With a group that has as much money as CalPers, it means over the next year and a half they will put $7.6 billion into commodities,” he said. “Now that is just them, but CalPers is one of the standard bearers for institutional investors, so I am sure large groups in other states will follow. The mind-set is the same as people are saying the 20-year equity cycle is over and the 20-year commodity cycle is just beginning.

“With people flocking to commodities, we will likely get a bubble at some point, but I don’t think we are anywhere near there yet. I see a lot of money coming into commodities, but I don’t think it is tied to short-term inflation expectations. I see it tied to long-term inflation expectations.”

Some market technicians still have natural gas prices in sight well over $10, but as one trader once said, “trees don’t grow to the sky,” and the likelihood of at least a temporary pause is certainly in the cards.

“The question at hand is whether natgas continues to rally from here on up to our $10.200 to $10.500 area target zone or has a bull market correction first,” said Walter Zimmerman of United Energy. According to Zimmerman’s analysis Monday morning, the candlestick pattern on the weekly charts suggests that in the near term prices may slide. “Peg the $9.445-9.540 zone ideal resistance for the bull market correction model. On the downside the $9.075-9.045 would be the most bullish case support with $8.790-8.760 the next step down for a correction,” he said in a note to clients.

Cold weather forecast for the East and Midwest may keep prices from falling too far. MDA EarthSat in its six- to 10-day forecast sees a colder-than-normal East contrasting with a warm West. “Models are in agreement [Monday] on keeping [below-normal temperatures] in the East, while warmth is the main story in the West,” said Matt Rogers, meteorologist at MDA EarthSat, in its morning report. He added that confidence has increased to the high side of moderate as there is “decent model agreement. Further increases in confidence are likely Tuesday if model consistency is sustained. The coolest temperatures are weighted toward the beginning of the period, with a slow moderation as next week gets under way.”

Traders are taking precautions in case prices do correct. “We’re long April natural gas from approximately $9.000 — raise stop to $9.012,” said Phil Flynn of Alaron in a note to clients.

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