Boosted by soaring cash prices and cooler temps both outsidetraders’ windows and in the latest weather forecasts, natural gasfutures were higher Monday after gains registered in the Sundaynight Access trading session were validated by a gap higher open.The December contract was the largest beneficiary of the Sundayevening-Monday morning buying frenzy, finishing up 24.2 cents at$5.698. Meanwhile the back months lagged considerably, evidenced bythe 12-month strip, which only advanced 8.2 cents to $4.826.

While market watchers have pointed to everything from trendlines to weather forecasts to explain the two-week, $1.30-centrally, one factor has not been overtly in bulls’ favor as of late.However that came to an end yesterday when cash prices roared backto life, narrowing the wide chasm that has separated November cashprices and December futures. NGI’s Henry Hub index for today is$5.59, just a dime less than December’s close Monday.Comparatively, over the first nine trading days of November, thecash-futures spread averaged a whopping 26 cents.

At one point yesterday afternoon, the cash futures spread hadshrunk to almost nothing and that prompted commercial traders tobid up futures prices in the last 45 minutes of trading, said EdKennedy of Miami-based Pioneer Futures. “Local sellers tookDecember all the way back down to $5.61, late in the session, buttrade buyers were there and ran it right back up.”

Another factor that Kennedy believes is fueling this market isthe latest round of weather forecasts, which range from bullish tomore bullish. While the National Weather Service continues to pointto below-normal temperatures for the intermediate-term, several ofthe private forecasters, including Jon Davis of Salomon SmithBarney, look for a blend of below, and much-below normaltemperatures. Citing a better track record as of late, Kennedyfavors the NWS’s outlook, which calls for below-normal readingsacross the entire U.S. except for the Upper Plains and Washingtonstate.

Looking ahead, there are no obvious selling indicators outthere, according to Ira Hochman of New York-based Trot TradingCorp. “If you really want to short this thing, you might sell on amove to $5.82 with a buy stop at the prior high of $5.87 to limityour risk.” Other than that, it would take a gap below $5.55(island reversal) on today’s open to convince Hochman the market iscoming off.

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