The sell-off continued Friday at Nymex as traders liquidatedlong positions ahead of the weekend in response to some blaringtechnical factors and in anticipation of moderating temperaturesthis week in key gas consuming regions. The September contractprobed lower to finish down 2.6 cents at $2.543 Friday. Estimatedvolume of 78,445 was low relative to the preceding five-straight,100,000-plus trading sessions.

“A textbook reversal,” is how Tom Saal of Miami-based PioneerFutures views the market’s rise and subsequent fall last week. “Bysetting a new high then closing below the previous three dailysettlements Thursday, the market was susceptible to further selling[Friday],” he said. But several prominent Nymex floor traders haddifferent ideas Friday and were seen leading the buying in anattempt to negate the reversal. Their push proved unsuccessful andprices were left to filter lower throughout the much of theafternoon.

Thompson Global Markets believes the selling pressure seenFriday may be a sign of things to come. “This wasn’t even aquestion of buying the rumor and selling the news, but an evenstronger indication that the market had simply exploited everyounce of potential buying, leaving the market vulnerable to evenlight profit taking,” the group wrote in its July 30, 1999 PowerReport.

But armed with the latest Commitments of Traders report releasedFriday by the Commodity Futures Trading Commission, Saal disagreesand feels the funds may still have some bullets left. Despite whathe terms the largest non-commercial weekly net-position change inthe history of natural gas futures (Speculators went from beingshort 9,882 to long 34,757-see table), Saal believes that they canstill add to their positions in the days and possibly weeks tocome. “They have probably sold a little of their length on the movedown from $2.72. Now they will be waiting for the market to breakback above that level before they add to their positions again,” hesaid.

Commitments of Traders

As of July 27, 1999

source : Commodity Futures Trading Commission. Report released July 30, 1999.

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