European Energy Markets:
Market undecided, German power may take the lead
TTF, NBP and German power markets all recovered from their lows in early August. But most of last week was spent in a congestion area with multiple bearish candles potentially marking out a top. Zooming out, however, bullish strength is somewhat maintained in the absence of a clear bearish trigger.
TTF and German power may be briefly diverging this week.
At the end of last week, the TTF was still stuck in a mean-reverting market regime deep inside a bearish reversal zone. German power, however, turned bullish in a new trending regime, our in-house algos show. This slightly increases the odds for German power to continue higher this week earlier than the TTF.
Over the past weeks, it looked like German power led the charge, with TTF following shortly after. So any divergence may be short-lived if the TTF turns bullish trending and catches up.
Please be conscious of our choice of words. We are talking in probabilities. While bullish odds are raised, recent historical behaviour also suggests that German bull trends typically do not last beyond the current bullish trend states (as per our algos) despite the trending regime.
Still, it is safer to stay with the trend when the market is trending, especially with the recent memory of the mid-July surge still strong on the back of our minds. Tighter trailing stops might not be the silliest of ideas for the German power market.
As for the TTF, we need to wait for a move outside the €58.08 – 62.72/MWh range before making a call.
Brent has turned into a trending regime once again, raising the odds of a stronger bull trend extension.
EUA is now neutral and increasingly prone to further bearish corrections. Another dip buying opportunity should be available soon. But stay out for now.
Henry Hub’s recent recovery has stalled lately but forming a cluster where it could potentially serve as a base for stronger recovery eventually.
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TTF Sentiment Benchmark
Bears retreated 8 points to 33%, bulls held at 40%, and the sideways camp swelled from 15% to 22%, the most undecided this poll has been all summer. Crowds this hesitant tend to produce false breaks, and that cuts both ways: it argues for patience with a bearish lean, and against chasing the upleg right now. Underneath, our algos still flag the market as ripe for a bearish turn. A daily close below €58.08/MWh remains the trigger that would force the undecided to pick a side.