Many observers were expecting a rebound yesterday, but got little confirmation that technical factors would support much of a change in direction. The August contract barely managed to halt the long decline. After slipping more than 22 cents in its first two trading sessions as the near-month contract, August struggled to muster a 2.1-cent daily gain, closing at $3.117, about a nickle off its daily high and 6.7 cents off its low of $3.050.

“You can’t have big moves everyday, but we are up 7 cents in Access,” noted one broker yesterday evening. “It shouldn’t surprise anyone [that prices should rebound here]. We’ve come far, a buck and a half down without any bounce up.”

Despite no change in the fundamental picture, technicals indicate room for an interim correction, according to many observers. “It’s reached the point where I think it’s pretty oversold on any number of timeframes,” said an analyst, noting that there’s a significant amount of non-commercial short positions (net 23,794) in the market, according to the latest Commitment of Traders report (June 26) from the Commodity Futures Trading Commission. At some stage, those shorts could be vulnerable to an upswing in prices, leading to a rally.

“I’m looking for an interim trading bottom to develop. I just don’t have any fundamental reason for it to do that.” From a fundamental perspective, the only apparent justification for a near-term rally would be that $3 is just too cheap. “Even with this bearish storage situation, we may have overshot the ‘fair’ value,” the analyst said. “I think if August climbs back above $3.20, that adds to the importance of $3 psychologically,” he added.

Despite the rapid decline seen in the market this year, there has been trouble around the dollar marks. Trading struggled through the $5 and the $4 levels. When the market first arrives at dollar levels, it comes to a halt initially but usually is able to breach them by a minor amount — $4.92 held for a while, for example. Eventually a balance develops around the dollar and the tables tip the other way. Traders messed around with $4 for three weeks despite a steady stream of bearish storage data. Eventually the downward pressure was too great.

The situation hasn’t changed here. It’s really not a question whether the storage surplus will grow at this point, given the comparison figures for last year’s refill. It seems to be more a question of how much the storage surplus will grow. The comparison figure for Thursday’s report this week is a 69 Bcf injection (for the same week last year) and last week’s injection was 108. “How are you going to make up a 40 Bcf swing in one week?” asked one marketer. “Forget about looking at the cooling-degree days or historical data. There’s no way it’s going to be 65 Bcf or less. I’m expecting something in the 90 to 105 Bcf range.”

Jay Levine, a broker with Advest, a subsidiary of Hartford, CT-based Mutual of New York, said he does expect a short-term “blip in the road” that will hold prices above $3 — probably more than a 50-cent increase, he said, referring to similar previous technical corrections in the August contract. However, “I think it’s going to be very short-lived, and I think we’ll see it sooner rather than later.” He expects the contract will eventually make its way below the $3 level. “The bearish fundamentals are just too strong.”

Cynthia Kase of Kase and Co. said last week that she sees a downside target and a strong level of support in the $2.50-57 area by analyzing 21 different price moves of the August contract over the past several months.

Nymex is scheduled to close at 1 p.m. EDT today for the Independence Day holiday and will reopen July 5 for normal trading hours. The American Gas Storage Survey report scheduled for release on Wednesday, July 4, will instead be released on Thursday at the normal time (between 2 p.m and 2:15 p.m. EDT).

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