The market wasted little time retracing Thursday’s losses inactive trading on Friday by gapping higher on the open beforeexploding upward amid growing concerns of more supply disruptionsdue to storms in the Gulf and Atlantic. The October contract spikedas high as $2.35 on a wave of panicked buying early in theafternoon on Friday as traders were already facing supplyinterruptions associated with Tropical Depression 8. However, byearly afternoon traders were shifting their concern to the lessimminent, but potentially more severe Georges still located in theAtlantic. That allowed traders to take profits ahead of the weekendand October to slip lower. October finished up 12.2 cents to $2.26.
Looking at the big picture, a California marketer feels theprevailing trend is to the upside, but warns that it could be abumpy road. Furthermore, he points to the $2.72 level basisDecember as “the first true resistance hurdle this market hasfaced” since October rebounded from the $1.63 low.
In the short term, a Houston-based futures trader feels theHurricane Georges will be the key on Monday. “There is no questionthe market will stay intact, but Monday’s movement is 100%contingent on whether the storm stays to the South or not. If ittracks to the South of Puerto Rico through “the slot” then themarket could gap 15 cents higher on the open Monday, However, ifGeorges takes a more northerly route, we could see a sizable gaplower Monday. The slot, he continued, is an East-West corridorbounded by Cuba and Puerto Rico on the North and The YucatanPeninsula and the Lesser Antilles on the South through which astorm can gain access to the Gulf of Mexico.
The aforementioned California marketer was quick to point outthat a gap lower on Monday would create an island reversal pattern,which is “an enormously bearish chart formation to any technician.I will lighten my longs in a hurry if the market opens off[Friday’s] low.”
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