Market Structure on Prompt Continuation

Yesterday's price action saw prices trade > 3.350 and close > 3.320 on prompt continuation. This marks the first time since the decline from the 10.100 high, that a previous corrective high in the downtrend has been exceeded.  Because of this, the long term trend has now shifted from down to bottoming.


Market Structure Application to Cal 02 Strip (Non- Basis Adjusted)

Since Cal 02 strip does not trade on continuation, I use the 12-month strip continuation to derive a market structure for Cal 02.  Because most of the components of the 12-month strip at this time of year are the same as Cal 02 components, the current price action for 12 month strip correlates quite nicely with Cal 02. 

In my previous memo to you, I listed 3.723 as a pivot point for 12-month strip.  This meant that if prices on 12-month strip close > 3.723, then Cal 02 should be trading @ 3.874, with a rally to 4.271 minimum expected and an outside shot at 4.774.  As of yesterday's close, 12-month strip closed at 3.803 up .285, and Cal 02 closed at 3.898, up .240. Here's the current structure:


4.774	Most bullish scenario.


4.271	Minimum upside target.


3.898	Current Cal 02 price.


3.240  	


2.471	Most bearish scenario.