Good Morning,

Before diving into the term market, let’s set the cash tempo:

Phoenix will realize a string of days around 110, two hitting 111, very hot for late summer, though both peak days occur over this weekend which will blunt their impact on the market.

Burbank is hot, too, with three days of 98, two which fall on business days next week (Mon-Tues). The North isn’t as sexy, San Jose barely musters the mid-80s, all of which will put some downward pressure on the NP-SP spreads.

And the Northwest is 10-12 degrees above normal, peaking on Monday, and most of the forecast stays above average, just not at those levels. In conclusion, cash will be healthy going into next week, and term markets will go bid in sympathy, at least that is our take.

Term Markets

I’ll be using some new dashboards and a different approach to this week’s APT Back blog; since we’ve re-tooled APT, the focus now is on the change in Rank versus prior emphasis on outright rank.

Months

The top table is the biggest monthly upward moves in rank; the bottom table is the largest downward changes in rank. The former would be the positions we’d consider entering, the latter the ones we’d liquidate (if we had them on). I’ll walk through a few of the big upward moves:

MidC Oct-Sep HL Roll

Falling knife, care to grab? Mostly driven off of strong cash and getting stronger given next week’s weather. Now trading just above contract lows, we show a slight bounce today. Despite all of the above, we’d buy this roll, though it may slide a touch more. Let’s look at the Rank History:

In the last four days it has become a buy, and two weeks ago it was a short which earned the bold a 1k btu profit; we expect this “now buy” another 1k over the next few weeks.

Buy MidC Oct HL, Sell MidC Sep HL

We’ll pass on #2, the Feb-Jan MidC roll because it is too far into the curve and we’ll also pass on #3; the Dec NP-SP HL spread because we fear next week’s cash (strong SP, weaker NP). But will watch it for a cheaper entry point.

Oct SP15 On|Off

Clearing at a contract high, and now bouncing around that. California hydro is on the decline with the off falling harder than the on. That said, our cash outlook may put more pressure on the spread over the next couple of days, so holding off until Friday or Monday might be a prudent move. Before making our call, let’s look at history:

Three weeks back this was a moderate buy, 700 BTU’s later it has become a Strong sell, and we concur:

Sell Oct SP HL, Buy Oct SP LL

There are more of these monthly biggest moves that are worthy of further examination; I’ve included the links so you can take a gander yourself. We also offer these reports as automated email delivery, let us know if you’d like to be added to those lists.

Quarters

The biggest move in the Qs was the NP Q2-18 On:Off

Last time this product rallied to these lofty heights, it puked back down to reality. Bear in mind the Q2-17 realized record streamflows at NP, do you really think Kally will see back-to-back big water? We don’t, before drawing any hasty conclusions, let’s look at the history:

The trade has moved up a whopping 306 points in rank over a week, and now it has posted a couple of days of no change, it is ripe for a short.

Sell NP Q218 HL, Buy Q218 LL

We’ll pass on #2, the SP Q218 on:off since it’s the same trade as the NP, and we’ll also pass on #3, the SP-PV Q319 because we are not using products that far out in the curve (in fact, I am removing from APT the Q2 and Q3 2019s for the time being).

PV Q418-Q318 LL Roll

Some of the juice has been squeezed, but we think the roll remains an attractive buy, but let’s go to history first:

This trade was a “Strong” buy three weeks ago and got paid, now it’s just a moderate buy, but we have so much VAR, and our Risk Manager loves us, so we will …

Buy Q418 PV LL, Sell Q318 PV LL