Bear Divergence, Stubborn Bulls Expose Potentially Steep Nat Gas Losses | RJO Futures

April 24, 2017 8:09AM CDT

In 18-Apr's Technical Blog following that day's bearish divergence in momentum that reinforced our broader peak/reversal count, we warned of further and possibly steep losses.  Nearly a week on the 240-min chart below shows continued eroding price action in the now-prompt Jun contract with 17-Apr's 3.324 high and 05-Apr's 3.422 high considered our short- and longer-term risk parameters this market is required to recoup to threaten or negate our preferred bearish count calling for further and possibly steep losses.

Jun '17 Natural Gas 240 min Chart

 Jun '17 Nat Gas Daily Chart

The daily log scale chart above shows the bearish divergence in the rate-of-change measure of momentum that, in fact, breaks Feb-Apr's uptrend and exposes the new longer-term trend as down.  It's also important to note that our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC actually WENT UP last week to 73% from the prior week's 71% reading.  This is owed to short-covers rather than additional longs, but nonetheless the whopping 296K long positions to just 108.5K shorts is fuel for downside vulnerability that, combined with the bearish divergence in momentum, we believe exposes further and possibly steep, relentless losses straight away.

These issues considered, a bearish policy remains advised with strength above at least 3.25 and preferably 3.347 required to threaten or negate this call.  A sharp and violent run at and possibly through 28-Feb's 2.827 low in the Jun contract should not come as a surprise, or even new 6-month lows below 2.55 on a weekly log active-continuation chart basis below.

Natural Gas Weekly Chart

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