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David Becker
Oil refinery

Natural gas prices surged higher on the open and continued to remain buoyed as colder than normal weather is expected to cover most of the United States over the next 6-10 and 8-14 days. Most of the mid-west will experience mid-winter weather during this period, which should curtail the amount of natural gas that is built into stockpiles. There are currently no disturbances expected to turn into tropical cyclones over the next 48-hours according to the National Oceanic Atmospheric Administration. Hedge fund traders continued to add to short positions in futures and options according to the latest commitment of trader’s report released for the date ending October 22.

Technical Analysis

Natural gas prices surged as colder than normal is generating additional heating demand. Resistance is seen near the July highs at 2.60. Support is seen near the former October highs at 2.38 and then the 10-day moving average at 2.31. Short term momentum has is whipsawing but has turned positive and is accelerating higher reflecting accelerating momentum. Medium-term momentum has also turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD trajectory is printing in the black with an upward sloping trajectory which points to higher prices for natural gas.

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Hedge Funds Add to Short Position

Hedge funds added to short position in futures and options according to the latest commitment of traders report released for the date ending 10/22/19. According to the CFTC, managed money increased short position in futures and options by 19K contracts, and increased long position in futures and options by 2K contracts. The outstanding open interest that is short futures and options outnumbers the open interest that is long by 3-times, 307K contract to 107K contracts. This sets the market up for a potential short-squeeze.

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