Morning Futures Roundup

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Natural Gas Futures Spike on Bullish Storage Data

   Fundamentals
After selling off steadily for the past 4 weeks, Natural Gas futures exploded to the upside, rallying over 14% on a bullish EIA storage report released last Thursday. The weekly report showed that only 67 billion cubic feet (bcf) was put in storage last week, which is well below the 75 bcf gain most analysts were expecting and caught bearish traders by surprise, sparking a massive short-covering rally.

Many analysts chalked up the more moderate gains to higher than expected demand, especially from power generators, many of which are switching from coal to natural gas for power production. The EIA estimates that utilities will use 20% more Natural Gas in 2012 due to "cheap" Natural Gas prices. In addition, some traders noted the weather forecasts calling for more above normal temperatures in the Midwest, with Chicago expected to see 6 consecutive days above 90 degrees. Though recent fundamentals were deemed bullish for Natural Gas in the short-term, Gas in storage is still at record levels for this time period, and we will still need to see increased demand to alleviate potential storage issues later this year.

   Technical Notes
Looking at the daily chart for July Natural Gas, we noticed prices retreated from recent highs nearly 90% of the move from the April contract lows. Prices are now running into some resistance at the 20-day moving average (MA), which is also near the 50% Fibonacci retracement level. The 14-day RSI has turned neutral, with a current reading of 51.61. This past Thursday's low of 2.168 looks to be support for July Natural Gas, with resistance found at the 100-day moving average, currently near 2.578.


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