The futures market retraced advances tallied Monday and thensome yesterday as traders discounted the threat of Hurricane Mitch.Profit taking by all segments of the market was the feature of theday. Only the final bell could stop the price erosion that left theNovember contract down 19 cents to settle at $2.108.
‘Buy the rumor, sell the event,’ is the strategy many tradersuse to take advantage of the high volatility that comes with apotential fundamental occurrence in the natural gas arena, andwhile some would point to Tuesday’s activity as just that, othersfeel the market has not seen the last of Mitch. “People have chosento ignore the storm until after November has expired [this]afternoon. Plus, cash prices did not give the futures market theshow of support it needed [Tuesday] morning and futures dropped inan effort to converge. However, I don’t think the market has seenthe last of storm-induced volatility. Mitch has too muchdestructive potential to be ignored.”
Another source feels Tuesday’s move was a preemptive strike byspeculators who got caught in a similar situation last month in theface of Hurricane Georges. “Instead of crashing 15 cents on thelast day of trading like the October contract did, Novembercratered the day before the last day.
Ed Kennedy of Miami-based Pioneer Futures thinks it is fair toassume the storm has been priced out of the futures market. “Whatwe saw [Tuesday] is a case of the market returning to pre-stormpricing. Prices in the low to mid-teens represented fair value lastweek and I would not be surprised to see a November settlementwithin that range.”
In last day technicals, November finds support clustered from$2.07-03. Resistance comes at $2.27 and $2.335.
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