The hedge funds have accumulated record high speculative long positions in the natural gas market two times over the past two years. In both instances, the market topped the very week the record long position was reached.
This is fairly typical in the commodity markets and is a reliable contrarian indicator. When the funds are record long, who else is left to come in behind them and buy the market?
The first time over the past 2 years the funds accumulated a record large long position in natural gas was the first week of May 2013, the very week the market posted a summer high. The second time was in February 2014 when spot prices rallied up to a 6.490 high. Funds are that point were long 458,901 contracts (futures only).
The funds almost built another record high long position in June 2014 topping out at 395,000+ contracts. This too came at the summer high.
Since June, funds have been steadily liquidating as the market fell from the summer high to a new 2014 price low for many of the forward strips.
The funds are currently long 200,837 contracts in natural gas according to last week's COT report. They will likely begin to add to existing long positions over upcoming weeks in an attempt to play the seasonal winter rally in the market back higher. This could be a supportive feature for the market.
No comments:
Post a Comment