After trading within an extremely tight, 3-cent range for almostthe entire trading session Thursday, the January contract was hitwith a late sell-off, as bears took advantage of nearly-illiquid,pre-holiday trading conditions. No fresh news was seen to incitethe liquidation, leaving several traders to suggest it was anattempt to set a bearish tone for the January contract expirationTuesday. The prompt month finished down 4.5 cents at $2.399 amidlight estimated volume of 28,617.

Thursday’s price movement may have been the straw that broke thecamel’s back for a market that experienced a more than 30-centprice decline since last Monday’s $2.715 high. Although that priceerosion puts the January contract back down near levels seen duringthe first week of December, analysts argue it is time that iscrucial now for a market whose price is heavily tied to wintertemperatures and heating degree days.

And according to Brad Nesiba of Omaha-based Strategic WeatherServices, the coldest air of the season which hit the majorpopulation centers of the Midwest and East last week will graduallybe replaced by normal and above-normal temperatures this week. Inhis latest six- to 10-day forecast, Nesiba looks for above-normaltemperatures to invade the western half of the country beginningTuesday and Wednesday and move to the East by Friday and Saturday.This forecast is based on the expected weakening of the ridge ofhigh pressure in the Pacific Northwest which has inspired the jetstream to trough dramatically in the Northeast quarter of thecountry. “Once the ridge weakens, the jet stream will take on amore zonal or flat pattern, which will keep the Arctic air pinnednorth in Canada,” he predicted.

However, a Gulf Coast risk manager takes a different tack andbelieves the futures market is technically still in a bullishtrend. “The move lower we have seen [last] week is profit-takingahead of the long holiday weekend, rather than a reversal of thetrend. There was good run higher [the prior week] and now peoplehave chosen to go into the holiday period flat.” And in addition tothe holiday weekend, traders were likely liquidating positionsahead of the January contract expiration Tuesday, she continued.”With January set to go off the board [this] week, [traders]realize the settle will be determined by people trading off theirexposure.”

However, if technicals do come into play early this week, theJanuary contract faces resistance at the chart gap left betweenTuesday’s low of $2.49 and Wednesday’s high of $2.475. Similarly,she finds support for January at the Dec. 10 price gap between$2.32 and $2.34.

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