Natural gas futures had enough in the tank Tuesday to shrug off some unfavorable economic news and close higher on the day. Prior to the open of floor trading the government released inflation figures and housing data showing declines much greater than the market expected. Natural gas futures, nonetheless, opened higher and were able to post modest gains on the day. January futures rose 10.6 cents to $5.751 and February added 10.6 cents as well to $5.781. January crude oil lost 91 cents to $43.60.
The 8:30 a.m. EST release by the Labor Department of the Consumer Price Index showed prices for November fell 1.7%. Observers had been expecting a 1.3% decline. The report for October showed that prices fell 1%. Housing starts came in at a seasonally adjusted annual rate of 625,000 the lowest since the Commerce Department began keeping records in 1959. Traders were expecting 740,000 starts, according to Bloomberg. The previous report showed that housing starts recorded a rate of 791,000 units.
Traders relying on a sophisticated matching of price patterns with prior price history haven’t had much from which to trade off. “Our patterns are showing more of a [potential] corrective bounce to the overall downtrend,” said a Texas trader. He added that he was looking for prices to spike higher in order to implement a short position. “We are looking for a $6.20-type of number, more of an intermediate-type bounce. If this were to occur, you would see signs of it immediately. Since this trade didn’t materialize, you have to throw it out and try something new,” he said.
“A [bullish] Thursday storage number would serve the purpose.” To the downside the trader said his patterns recognize technical support in the low $5.40 area, but “not the second time around. Support moves lower. If the market falls to $5.45, it could continue to $5.19 on the weekly chart, but still fall further from there,” he said.
“Today’s trading had a very limited range, and I am thinking it is the calm before the storm. It’s like a coiled spring and can go either way. My bias is to the upside, but even if it jumps higher, I would use it as a selling opportunity.”
The cold air pummeling the Northern Plains as far south as Chicago isn’t expected to have much effect on populous eastern energy markets. For the week ended Dec. 20, the National Weather Service (NWS) forecasts below-normal accumulations of heating degree days (HDD). The NWS says New England will see 189 HDD, or 51 fewer than normal, and New York, New Jersey and Pennsylvania will have 176 HDD, or 52 fewer than normal. The Midwest from Ohio to Wisconsin is expected to have 244 HDD, or 17 fewer than normal.
Seasoned traders are also looking for selling opportunities. “While the most likely course of near-term price direction appears to be a continued trading affair between about the $5.46 and $6.25 areas per nearest futures through this week and next, we still anticipate an eventual violation of this range to the downside,” said Jim Ritterbusch of Ritterbusch and Associates. He said he was holding on to a “neutral trading stance” but would use rallies of the February contract over $6 as selling opportunities.
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