Technically Speaking

What does natural gas think it is live cattle? I mean seriously, a look at the market's continuous weekly chart and one would think it was looking at the chart for Feb live cattle. But no, the star of the commodity show is now natural gas, aka The Widow Maker.

This past week saw the spot-month contract jump to more than $5.00, levels that haven't been seen since June 2010 (I had to go back to the long-term monthly chart to find that). Support has come from both commercial and noncommercial traders, with the former reflected in the sharp uptrend by the nearby futures spread (bottom study).

Friday's CFTC report showed noncommercial traders continuing to hold a net-short futures position of 48,713 contracts (not shown on chart) a reduction of 14,000 contracts from the previous week. Keep in mind that these reports are for the previous Tuesday, in this case January 21, so a great deal of activity could have occurred to close out the week.

How high can the natural gas market go? Again, the monthly chart shows resistance between $5.829 and $6.407, the 33% and 38.2% retracement levels of the previous downtrend from $13.694 (high from June 2008) through the low of $1.902 (April 2012). And while weekly stochastics (middle study) are already showing an overbought situation above 80%, monthly stochastics are not quite there yet meaning there could be more room to run.

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