June natural gas futures put on an impressive show of strength Monday, but neither short-term traders nor analysts who follow the complexities of technical wave analysis are ready to say the bear has gone into hibernation. In active trading June futures rose 15.5 cents to $4.170 and July added 14.7 cents to $4.271. June crude oil rose $1.69 to $76.80/bbl and the Dow Jones Industrial Average gained 405 points to 10,785.

“The volume was over 120,000 contracts and today was significant technical buying by black-box algorithmic traders as well as straight up short-covering,” said a New York floor trader. He added that he didn’t think at this point that there was a fundamental long-term shift in market perceptions to a bullish outlook, but “given the market’s failure around $4.23” he considered it a definite possibility.

The near-term consensus is that “this is a rally, sell it. We are still going lower. There is plenty of gas and today is just a black box-driven rally. The next set of buy stops is at $4.28,” the trader said.

Others see hints of a seasonal advance. “Whenever there has been a major low, as soon as prices bottomed they rallied into the last week of May into the first week of June,” said Brian LaRose, an analyst at United-ICAP. He added that if the market has put in a major low, “I am kind of leaning to that kind of price action where we see a late seasonal advance into the first week of June. That doesn’t mean we get an average seasonal advance of 53% and get over $5, but we could get some move higher. Last year we rallied from $3.515 to $4.57 in 12 days.

“I’m not looking for a major breakout, maybe $1 or $2 to the upside in my most bullish case, but that will not be confirmed unless we can get above $4.35,” he said.

For the moment other analysts are content to just call the market resilient and suggest that its main positive factor is its strong discount to petroleum substitutes on a heat content basis. “Considering what the equity markets and the [petroleum] complex did [last] week, the gas market did quite well,” said Mike DeVooght, president of DeVooght Capital Management, a Colorado-based trading and risk management firm.

He noted that the somewhat bearish 83 Bcf gas storage injection last Thursday failed to push the market lower but suggested that “on a fundamental basis the only thing that is bullish for the gas market is that it is so cheap relative to it substitutes on a Btu basis. You have to be careful reading to much into how cheap it is; it has been cheap for quite some time. For hedgers we are holding current short positions. We are taking a small long position for speculators,” he said.

DeVooght advises trading accounts to stay long October $4.50 calls at 38-45 cents and end-users to stand aside. Producers should hold what is left of a 12-month $5-8 collar initiated in August at 35 cents as well as the balance of a 12-month $5.50 put against the sale of a 12-month $7.50 call that was begun in December.

Data from the Commodity Futures Trading Commission showed strong movement from the long side of the market to the short side. In its Commitments of Traders Report for May 4, long futures and options contracts (2,500 MMBtu) on IntercontinentalExchange (ICE) fell 136,672 to 373,009 and shorts rose by 4,088 to 54,010. At the New York Mercantile Exchange long futures and options (10,000 MMBtu) dropped by 8,489 to 153,632 and shorts rose by 21,761 to 254,653 contracts. When adjusted for contract size, longs fell by 42,657 and short contracts rose by 22,783. For the five trading days ended May 4 June futures fell 30 cents to $4.015.

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