In this article, we examine the significant weekly order flow and market structure developments driving NG price action.
13-18 January 2019:
As noted in last week’s NG Weekly, our primary inference for this week’s auction was for buy-side activity following last week’s late buy-side breakout attempt. This probability path did play out, resulting in buy-side continuation to 3.72s late in Monday’s auction. Selling interest emerged there, developing balance, 3.72s-3.33s, through Thursday’s auction before a failed sell-side breakdown attempt to 3.20s in Friday’s auction developed into week’s end, closing at 3.42s.
This week’s auction saw buying interest early week, 3.32s, as buy-side continuation developed in Monday’s auction following last week’s buy-side breakout attempt. Price discovery higher developed through Monday’s auction, achieving a stopping point, 3.72s, within key supply overhead. Self-similar selling interest emerged there into Tuesday’s auction, halting the buy-side phase. Price discovery lower developed in Tuesday’s auction, achieving a stopping point, 3.37s, into Wednesday’s auction.
Rotation toward the balance high developed in Wednesday’s auction to 3.69s where selling interest halted the auction. Rotation lower back through the range unfolded, achieving a stopping point, 3.33s, as the pullback low was tested. Buying interest emerged, 3.38s/3.40s as the low was rejected late in Wednesday’s auction. Narrow, two-sided trade developed in Thursday’s auction through the EIA release (-81bcf vs. -82bcf expected) as a balance development continued. A false sell-side breakdown developed in Friday’s auction, achieving the stopping point low, 3.20s. A structural buy excess developed there, driving price higher back into prior balance ahead of Friday’s close, settling at 3.42s.
This week’s primary expectation of price discovery higher did unfold as last week’s buy-side breakout resulted in price discovery higher from the high-volume node, 2.983s (8.7k contracts). Buy-side continuation developed to 3.72s into key supply overhead before selling interest emerged, halting the auction and developing a pullback into week’s end, closing at 3.42s.
Looking ahead, the near-term bias (2-4 week) now shifts to a neutral bias, based on market structure and order flow. The stopping point low, 2.87s, resulting in buy-side activity to 3.72s where a stopping point has developed within key supply. From a structural perspective, the highest probability path near-term (2-4 week) is for continued two-sided trade, 3.72s-3.20s, as consensus develops before the next directional phase. Focus now shifts to market response at key support, 3.30s-3.20s, into next week.
Due to the partial US government shutdown, the CFTC is not currently publishing the weekly COT report. Our data will update when this becomes available.
The market structure, order flow, and leveraged capital posture provide the empirical evidence needed to observe where asymmetric opportunity resides.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.