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Futures Continue Higher on Short-Covering
A combination of stronger cash prices met with and conspiredwith constructive technical factors to lift the futures market forthe 4th straight day Tuesday. November managed a 5.9 cent rally tosettle at $2.202, but the big news of the day centered on the outmonths which posted similarly impressive advances, bringing the3-month strip up 6 cents. Estimated volume was a healthy 69, 463 onthe day.
Sources felt strong cash prices were an undeniable factor inTuesday’s price moves as prices at the Henry Hub drove toward the$2.00 level. That cut in half a cash-futures basis which has rangedas wide as 50 cents this month. Today’s Daily GPI Henry Hubaverage is a $1.95, up 21 cents from yesterday.
Tom Saal of Miami-based Pioneer Futures thinks non-commercialshort covering activity has helped to fuel recent gains. “I’d saythe fund groups were net-short about 10,000 positions and they havebeen seen exiting out the last several days. However, in contrastto the dramatic spike caused when they were net-short 30,000 inopen interest, this time they are buying in a more orderlyfashion.”
Ed Kennedy, also of Pioneer Futures, adds that now most fundtraders have changed their focus from the November to the Decembercontract because December gives them more time to realize asubstantial move. “Whereas November narrowly missed a settlingabove its 40-day moving average of $2.21 [Tuesday], Decemberfinished above its 40-day moving average of $2.45. That will invitesome funds to enter long positions as soon as Access trading [lastnight], while others typically need a protracted two-day settlementabove the 40-day to get them in the market.” In either case Kennedyexpects December futures to challenge, possible break overheadresistance at $2.54 as soon as today.
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