Technical factors can, and often do, send prices hurling in adirection contradictory to what underlying supply and demanddictate. While this confounds dyed-in-the-wool fundamentalists anddelights technicians, it can also backfire. Yesterday was one ofthose days.

After opening flat to Wednesday’s close, the futures marketreceived a short but potent burst of short-covering buying interestby traders who sold into the recent price slide. By 10:45 EDTyesterday the December contract was at a critical juncture, restingjust a penny below strong resistance at $2.74. A break above thatlevel would pave the way for further advances, traders suggested.But like zombies snapping out of a trance, traders suddenly came totheir senses and realized that not the weather, nor storage datanor the cash market supported higher prices. The December contractspiraled lower for the rest of the day, dropping 13.5 cents tofinish at $2.522.

Technicians were unable to fight the considerable weight appliedon the market by the bearish fundamentals, a Gulf trader commented.”Once the rally stalled, it was all over for the bulls.” He alsonoted Wednesday’s storage report did not help the bulls’ cause.”Over the last five years, storage has averaged an 11 Bcfwithdrawal this week. That does not compare too favorably with[this Wednesday’s] 12 Bcf injection.”

Looking ahead, many traders agree the only thing that willreverse the negative momentum is a cold snap, and for the momentthat doesn’t appear too likely. “Both private and governmentalforecasts are pretty much in agreement for next week. The middle ofthe country is expected to see above normal temperatures until atleast next Thursday.” The National Weather Service will release afresh six- to 10-day forecast image shortly after 3 P.M. today.

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