As if taking a cue from the professional basketball team inChicago, the bulls of natural gas were on top again last week atNymex. A short-covering rally that began Wednesday resumed Fridaysending the July contract to $2.284, a 14-cent increase for theday. Estimated volume was a robust 99,631.

Sources continued to cite private weather forecasts calling foran overall warming trend for most of the country this week as causefor the rise, but also admit technical factors are definitelyadding to the buying. The most compelling of those technicalfactors was released on Friday in the form of the biweekly CFTCcommitment of traders report. That report, showing non-commercialshort positions had swelled to a record 34,174 as of June 16,serves as confirmation the gains posted last week were due to heavycovering by speculators and fund groups. Tom Saal of PioneerFutures in Miami points out the non-commercials are shorter thanthey have ever been and they were going short while the market wasreaching new lows. That set the stage for the enormous rebound thispast week, he continued.

Looking toward the July expiration this Friday, opinion is mixedwhether July can hold or even build on its gains. PegasusEconometric Group of New York continues to be see more room for therally despite bearish fundamentals. In their June 19 Natural GasReport they acknowledge the existence of a possiblehead-and-shoulders bottom formation on the daily charts thatimplies a run to the $2.42-50 area.

However, Saal takes a more conservative stance. He places chartresistance at $2.33 and $2.43, but notes that of the six 1998contracts to have already expired, two expired right at $2.00 andthe other four around the $2.30 level. “July could definitely seefurther gains but its value might be held in check around the $2.30level.”

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