The setup preceded what is best characterized as a short-covering rally until June. The bearish trend and lack of support into the first leg of weakness prevented a technical breakout. The first sign of trouble was the huge long liquidation from “connected money” into the June rally. When this liquidation was not followed by aggressive accumulation into the July weakness, the rally fizzed.
Two months later, ‘connected players’ have begun to aggressive repurchase NG. As price tests and slightly breaches the April 2010, commercial traders, figuratively speaking, have bought NG will both hands. The inflows after a challenge and slight break of the near term swing low hints at comparisons to the Fall of 2007. It was the second wave of buying from late 2007 to early 2008 that sparked an aggressive rallying in NG.
I must reiterate that NG’s technical position remains challenging to say the least. Commercial money’s aggressive push on the long side, however, must be watched carefully. NG is a volatile market that tends to breakout in sympathy with the leverage money setup from connected players.
Natural Gas ETF and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:
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