Technicals

After a lower opening failed to attract follow-through selling,natural gas futures rallied Friday as traders covered shorts aheadof the weekend. The December contract notched its low for the dayat $2.755 in the first hour of trading before bubbling higher tofinish at $2.884, a 5.8-cent advance on the day. Estimated volumewas above-average, with 80,226 contracts changing hands.

After notching gains in both the regular and Access tradingsessions Wednesday, the futures market sank again yesterday asbulls battled with an increasingly negative technical picture andunsupportive weather outlooks. Within an hour of its $2.895 open,the December contract had already slipped a nickel lower. From thatpoint it continued to chop lower for the rest of the session,finishing down 4.7 cents at $2.826.

Fueled by stronger cash prices and revised weather forecasts,the futures market erupted higher early yesterday as speculativeand commercial traders added to their positions. However, afternotching the highest mark for a spot month since the week endingDecember 12, 1997 at $2.77, the September contact filtered lower ina quiet afternoon session to settle at $2.721, up 2.3 cents on theday. Estimated volume was light, with 62,221 contracts changinghands.

Natural gas futures continued lower in an abbreviatedpre-holiday trading session Friday, adding to losses achievedWednesday and Thursday and stifling the hopes of bulls who werelooking for short-covering buying into the long weekend. The Augustcontract finished down 2.2 cents on the day at $2.287, 13.3 centsless than Wednesday’s high price. Estimated volume was an extremelymodest 28,784.

Long liquidation, that began with local selling Wednesdayafternoon, continued yesterday at the New York Mercantile Exchangeas traders sided with bearish supply figures and ignored bullishdemand predictions. The August contract tumbled 8.5 cents to $2.309and September matched that by dropping 8.6 cents to finish at$2.333.

Whether the cash market follows the futures screen or vice-versais the source of considerable conjecture and debate in the naturalgas market-almost on a daily basis. Although there have been timeswhen futures have been the driving force in the market, many feelthat cash prices, egged on by solid heating demand, have liftedfutures prices out of the doldrums this month.

For the second week in a row, cooler temperatures and spikingcash prices piqued the attention of buyers Monday, prompting shortcovering amid some fresh buying. That enabled the prompt Januarycontract to gap higher on the open, and quickly move to majorresistance at $2.00. But the buying dried up and January was tradedmostly sideways before ticking down at the final bell. Januaryfinished at $1.952, up 9.4 cents for the day.

Normally natural gas futures are influenced by a hodgepodge offactors: storage, technicals, support, resistance, supply anddemand. Of course last week was anything but normal as a hurricanewhich the market has not seen the likes of since Andrew, wasbearing down on the Gulf of Mexico leaving a wide swath ofdestruction in its wake. Now the question to be answered is whetherHurricane Georges (pronounced ZHORZH) will not only live in theminds of residents of Florida and the Carribean Islands, but alsoin the memories of natural gas traders. That was still a very murkyquestion as of Friday. One thing was becoming evident late lastweek: October’s expiration today will be anything but normal. But,despite the continued threat of storm, the October actually slipped0.2 cents to settle at $2.181 on Friday.

“Fundamentals are bearish, technicals are bullish, and today[Tuesday] the bulls beat the [socks off] of the bears.” Rather thandescribing a pro sports encounter between two Chicago teams, aHouston-based aggregator was summing up his view of the physicaland futures gas markets. Led by a soaring screen that dazzledobservers with its pyrotechnics (“this is crazy,” exclaimed onemarketer), cash prices were rising by a dime or more at nearly allpoints in the face of continuing widespread mild temperatures.