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Natural Gas Sees a Confirmed Breakout


Was this narrowly ranging inside day just the calm before the storm?

The following are the latest daily summaries of my ongoing intraday coverage, providing context to interpret price action. Any prices listed are for a contract's current "front month." Their direction tends to correlate with any ETFs listed for each.

Today's Highlight: Crude oil and natural gas have traded inversely at key turning points this year. That could be very good for natural gas on Thursday -- and very bad for crude oil.

Dollar Basket
Narrow ranging this week had undermined last Friday's recovery effort, suggesting a little more time would be spent bottoming before a rally could begin. That didn't prevent gapping up to range around 80.50-80.60 Wednesday. But the gap's origin still suggests a bottom hasn't yet completed, making another dip to 80.05-80.10 likely.

Dec Contract EC; (NYSEARCA:FXE)
Monday and Tuesday's narrow ranging had kept alive potential for attacking or retesting recent highs before completing a top and extending down. So extending down sharply Wednesday anyway should be recovered abruptly. Back above 1.3565 would signal the pullback had ended.

Dec Contract GC; (NYSEARCA:GLD)
The rejection of 1321.00 resistance was completed Wednesday by gapping down and extending sharply lower to test 1294.60. Still, 1306.00 support was not broken cleanly. The resolution down remains likely so long as 1311.00 holds as resistance.

Dec Contract SI; (NYSEARCA:SLV)
Probing above 21.88-21.95 had held 22.50 for a second consecutive session, making a reaction down Wednesday easier. But 21.88-21.95 held, and back above 22.15-22.25 should extend to fresh highs attacking 23.00.

30-year Treasury
Dec Contract US; (NYSEARCA:TLT)
Wednesday morning's market drop didn't have any impact on the long bond, which ranged narrowly while awaiting the afternoon's auction. The lowest level in a week was tested, but only barely lower, and still several ticks from even touching the 132-22 pullback limit.

Crude Oil
Oct Contract CL; (NYSEARCA:USO)
Two days of testing 104.00 resistance without breaking higher wasn't necessarily bearish, but it did resolve down sharply Wednesday by probing under 102.95 support to 101.18. Now 99.10 is in-play so long as 102.30 holds as resistance, and so long as Thursday confirms with a second consecutive lower close.

Natural Gas
Wednesday wasn't required to produce the third higher close now required by the confirmed breakout. The session's narrow ranging was probably due to anxiety ahead of Thursday's EIA report -- at least that had better be its excuse, which would be proved by rallying sharply into the afternoon.

Editor's note: Rod's analytical techniques are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He applies his techniques live intraday, primarily to S&P futures, at RodDavid .com.
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