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Nor'Easter Fails to Provide Support, April Drops 4

Nor'Easter Fails to Provide Support, April Drops 4

Six inches of snow in New York wasn't enough to convince futures traders to resume the up-trend the American Gas Association storage report so thoroughly wiped out last week. The April contract moved sharply lower for the third session in a row, closing down 4.2 cents to $1.717. Shortly before the close, the contract broke below what was deemed a key support level at $1.70 to post a low of $1.695 for the day. The $1.755 high was reached just after the opening bell.

"For right now, I'd say it looks like the market is still going lower," said Alan Kaufman of Trilogy Capital MGT. "[How much lower] will depend on the fundamentals. It's been in such a solid downtrend for a relatively long time that even the shorter-term averages we look at, the 90-day, have held us short here for some time. So today's action to the downside just kept us right in a comfortable band away from any of the significant averages. I could see us being down another 10 cents at the end of this week," he said.

The only bullish signal for natural gas, according to Kaufman, was the rally going on in the neighboring crude oil pit at Nymex. It's possible there could be some psychological spillover into the gas pit if another fundamental indicator, such as a big storage withdrawal, provides the spark, he said. "If crude continues to rally it might provide some support for natural gas in here. People start to get bullish in the pit next door and they say 'well natural gas is energy and it's been going down forever; it looks cheap."

A psychological factor that could be pulling traders in the other direction, however, is the weather forecast for New York. Sixty-degree temperatures are forecast for the next few days. "It's only half a joke that the local weather affects trading on the exchange," said one trader.

He said, $1.625 is the next major support level. It was the contract low set on Feb. 26. "This thing has dropped like a prom dress. The daily technicals are really right there in the middle so you've probably got a little bit more room for this thing to move down if it wants to, maybe another 7 cents. But I'm guessing the market isn't going to get close to $1.625, at least until the storage report comes out. If the withdrawal turns out to be much lower than expectations, then I think we'll test that low especially because now there's a backdrop of really warm weather."

The National Weather Service's six- to 10-day outlook for March 21-25 released yesterday is calling for above-normal temperatures over the Rockies, the Plains, the Midwest, most of the Southeast and the Mid-Atlantic regions. Normal temperatures are expected over the Midcontinent and Texas. The only area expected to see below-normal temperatures is along the Pacific Coast.

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