While many expected a bearish storage report (78 Bcf ofwithdrawals) to result in further declines in the March futurescontract on Thursday, the opposite took place. Borrowing a phrasefrom Federal Reserve Chairman Alan Greenspan, one trader said”irrational exuberance” took over at the New York MercantileExchange yesterday, which pushed the March contract up 6.4 cents tosettle at $1.829.

“What we saw [Thursday] is technical range-bound trading,” ananalyst said. “The March contract continues to bounce back andforth between its support and resistance levels, which aresupported by the fact that non-commercials are still net short, andconstrained by poor fundamentals.”

Apparently, the supposedly bearish storage report wasn’t bearishenough to send futures below their current support level of $1.73.”Considering how bad the weather was, that storage number couldhave been a lot worse.And if the storage report isn’t bearishenough to take the March contract below $1.73, then the contract isgoing to run up. But at the same time, fundamentals were bearishenough for the contract to stop shy of the $1.86 resistance levelduring its upswing on Thursday,” the analyst said.

The National Weather Service’s 6-10 day forecast through Feb. 13calls for below-normal temperatures for southern California andnorthern New England. However, above-normal temperatures areexpected over most of the nation. This is in addition to the factthat the year-on-year storage surplus is on the rise once again.

But even without these weaker fundamentals, March would probablybe hard-pressed to climb much higher today, so reasoned theaforementioned analyst. “While we saw some people covering shorts[Thursday] propelling the contract higher, they are mostly daytraders and are unlikely to initiate fresh positions [today]because they’re not going to want to have open positions going intothe weekend if they can help it, he said. As a result, the analystdoesn’t expect much to happen today, except for maybe a minorsell-off back below the $1.80 level. However, should March manageto settle above both major trendline resistance at $1.865, and the40-day moving average at $1.881, “March will be in a prime positionto challenge the $1.95 and $2.00 levels,” he added.

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