Futures traders are always looking to historical price patternsto predict future trends, but last week they were particularlyfocused on the last 40 trading days and the average of thosesettlement prices. Referred to as the 40-day, the prompt month’s40-day moving average has been an increasingly important indicatorfor those looking to predict a price move in the market. But boththe magnitude and duration of those swings have decreased in thepast several weeks, leading traders to hypothesize some of thedynamics in the market could be changing. Some of those changeshave been evidenced by the December contract’s inability to sustaina move much above or below the 40-day moving average in recentweeks. And last Friday was no different when the December contractrebounded 6.5 cents to settle at $2.459, just 1.4 cents below the40-day.

A New Jersey-based analyst thinks the market has tracked closerto the 40-day in recent weeks than it typically does. He points tolack of sizable fund group participation in the market as a cause.”Normally you can bet on the funds buying above and selling belowthe 40-day average, oftentimes propelling the market dramaticallyin either direction. However, they have been notably absent in thismarket lately, and price swings have been small to non-existent.”Open interest, which many sources feel is good barometer of fundand non-commercial activity, has been a relatively low 238,471positions. Additionally, the Commitment of Traders report said thatas of Nov. 3, non-commercial traders accounted for just under 11%of the total open interest.

Ed Kennedy of Miami-based Pioneer Futures agrees the funds haveremained largely on the sidelines in recent weeks and feels thatthey might be re-evaluating their entry and exit parameters. “Fundshave gotten burned the last several times they stepped into themarket. Unlike commercials, they don’t have to trade natural gasand will do so only if it is profitable. They might be taking agood look at their trading regimen.” Looking ahead, Pioneer Futuresrecommends traders take advantage of the recent trading range byselling the low $2.50s and buying the high $2.30s.

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.