Energy News and Market Information for the week of 6/1/2016
Author: Jason Scarbrough
Natural Gas: Bullish
There has been a very warm start to our cooling season in the major CDD regions on the US (east of the Mississippi) – this has translated into a very disappointing injection pace for the bears – coming in far below normal numbers. This is certainly a great deal of the short term ammunition the bulls are using to push natty higher. Tomorrow, the market is expecting an injection of around 80 BCF – about 60% of the norm. The problem for the bulls long term is that even if we complete the injection season with around 60% every week – there will likely still be another record in the ground – making it very tough to see sustained prices above $2.50 this year – but not out of the question that bulls make some kind of run at some “spikey” highs towards 3$.
As for the rally this week – the bulls are once again taking advantage of the sizable contango gap between the expiring month and the new prompt (now July delivery) – buying the expiration – shopping for stops – creating another short squeeze. This time of year, bears are hard to get out of hibernation(ugh) to make any kind of bold stand, especially in front of a push like this. There is a massive gap up on the continuous chart at expiry of close to 20 cents (the largest gap up in recent memory), MACD turned bullish the same day – as did the parabolic indicators, and trade on the continuous chart has crossed both the 100 DMA – and for the first time since November of 2014, it has crossed the 200 DMA. The next stop on the fib retracement is $2.534 (62%).
So it would not be surprising if this rally got the prompt back up to test $2.50 – or even the YTD contract(July delivery) highs around $2.65. But to do this, the bulls will have to break through at least 3 relatively significant resistance points.
- The bulls are currently stalled at the July contract’s 62% retracement from the move from those YTD highs to the march low of $1.939 at $2.369
- The July contract has some previous resistance that proved relatively significant last February around $2.45
- The 200 DMA lurks right around the same level
However – there is very little stopping a move to $2.50 on a technical basis on the Continuous chart.