The major rally that lifted the July contract 35.5 cents to$4.398 on Monday, gave way following some selling pressure earlyTuesday morning. After reaching a high of $4.505, July tumbled 26cents to a low of $4.245, and ended the day down 10.4 cents to$4.294. Volume was heavier than on Monday with 100,223 contractschanging hands.

Most sources agree this market will continue to move in largeincrements while it remains in the rarefied air above $4. “Thereare huge holes in this market,” said one broker. “We’ve cleared outall the buy orders below and all the sell orders above. You canmove this thing around 10-15 cents at will.

“Cash came off a little bit this morning, and you saw whathappened. It took 20 cents off the futures in a heartbeat. Look formore of the same tomorrow,” he added.

Peter Hattersley of Rafferty Technical Research said, however,he sees more optimism in this market than ever before at these highprices. “I don’t know that it’s going above this because therealways has to be somebody to buy it, and optimism and buying aretwo different things. But you’ve got just a tremendous amount ofoptimism. People are buying $6, $7 and $8 calls. I’ve never seenthat before over the counter. You still have major support around$4. You have major resistance at $4.60, and I’m going to guess therest of this week you could stay in that range.”

The AGA storage report will be a major influence today, butHattersley said he thinks the market already has a bullish reportfactored in. “You’ve got to realize we’re at $4.50. [AGA] bettercome out bullish. I mean it’s like if they came out with someextremely bearish numbers people would say why in the hell are wehere, and we would break a dollar [down] in a day.”

The sharp 76-cent fall last Thursday from the $4.555 high onWednesday likely will be a major concern for bulls looking to buyover historic highs. “I think if you are going to carry on newlength over $4.60, there’s a lot of risk there,” said Hattersley.”I think until we get back into more weather, some kind of a heatwave, $4.60 might be an obstacle.”

A heat wave is approaching the eastern half of the nation,however. And while the all-time high at $4.60 will be a toughobstacle to cross, some believe history does provide the incentive.Based on the roller coaster ride in the winter of 1996-97 whennear-month prices spiked up to $4.05, dropped back down and thenrose again relatively soon to $4.60, one source said she believesthe July 2000 contract has the potential to reach a high between$5.10-$5.15.

She noted that winter 1996-97 and summer 2000 have morefundamental differences than things in common, but there are somesimilarities: tight supply, a squeeze on short futures positionsleading to the first high ($4.05 in 1996 and $4.55 last week) andspeculative trading funds at less than their maximum long positionbecause of increased margin requirements.

“I figure after the close of trading tomorrow, assuming we getan AGA [report] within whatever the trade is expecting, or morebullish, we are immediately going to test $4.60. We have a heatwave coming that will stick around from the middle of the month toabout June 20 that should encompass most of the country.

“I’m looking for this thing before July goes off the board toreach somewhere between $4.80 and $5 based on the weather, where weare at right now and the fact that with each week that passes notputting gas in storage makes the fear factor that much greater.”

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