Following a four-day, 45-cent price decline, bulls weresuccessful in stopping the bleeding yesterday as strong physicalprices gave way to an unexpected late short-covering rally. Cappingits tenure as prompt month in dramatic fashion, the Januarycontract expired yesterday at $2.344, up 7.3 cents on the day and ahalf-cent above where it debuted as spot month on Nov. 29.

Although the indicators were slow to develop yesterday, therewas a certain tension surrounding the futures market, a tradernoted. “Cash prices were not falling as swiftly as many people hadthought following [Monday’s futures market] decline, and indexpremiums were getting stronger. The market felt like it was readyto burst.”

And burst it did. After trading a few pennies above unchangedfor much of the session, the futures market erupted shortly before3 p.m. as traders hastily covered shorts.

“We are creatures of habit and what you saw today was proof ofthat,” a Gulf trader explained. “There were a number of marketshorts looking for a repeat of the drop that struck the Decembercontract late on its expiration day. When the market kept movinghigher during the last 30 minutes of trading, those shorts wereforced to cover.”

Looking ahead, traders are mixed as to whether bulls will beable to capitalize on yesterday’s spike. “Even though the futuresis stronger [Tuesday], I am not convinced that it will hold up,” aChicago trader lamented. After all, this was an expiration-relatedshort squeeze. In order for prices to continue higher, we need somesub-zero temperatures in Chicago; 20 degrees is just not going tocut it.”

However, a Dallas-based trader takes a more technical and,therefore, bullish approach. “The daily charts are looking up andthere could be a push to move higher fill in the $2.475-49 gap leftby the move lower last week.”

The February contract was off to a positive start last night inafter-hours trading by posting a 2.1 cent gain to $2.39.

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