After drifting sideways for much of the session yesterday,natural gas futures were hit with a late round of selling upon therelease of fresh industry supply data. The May and June contractswere hit the hardest, each tumbling 4.3 cents to finish at $3.055and $3.075 respectively. Estimated volume was average with 78,378contracts changing hands.

According to the American Gas Association, 25 Bcf of gas waspulled from underground storage facilities last week, bringing thetotal down to 1,008 Bcf, which is the lowest level since March of1998. Storage is now 361 Bcf less than at the same time last yearand dead even with the six-year average.

The initial reaction from the report was bullish. Marketexpectations ranged from a 2 Bcf refill to a 30 Bcf withdrawal.However, the initial buying surge failed to attract much in the wayof new buyers, and that sent out a decidedly bearish messageyesterday afternoon in the Nymex pit. The last hour of trading sawthe prompt month fall 9-cents from its $3.145 high.

For Tom Saal of Miami-based Pioneer Futures, Wednesday’ssell-off is indicative of the type of buyer that had entered themarket Monday and Tuesday. “We saw fresh long accumulation bylocals and speculators over the past couple days. The problem wasthat these buyers are not in for the long haul. They get in, make afew cents, and get out,” he said.

Looking ahead, Saal believes profit taking could continue todayahead of the Nymex holiday Friday He gives the May contract an 80%chance of notching a weekly low at $3.012 and a 20% chance of afalling all the way to $2.96. Currently, Wednesday’s $3.055 is thelow for the week.

Saal’s prediction is based on a new technical trading systemcalled Market Profile, devised by Pete Steidlmayer, which measuresprice levels versus time in an attempt to reveal fair market value.Its basic tenant is that a market, during the course of a week,will move a certain amount away from its initial value. Thatinitial value for this week is $3.15, which is the mode of all thetrading Monday and Tuesday, says Saal. Because the market broke tothe downside, there exists a strong probability it will continuelower today.

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