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With Fundamentals Away, Technicals Rule the Day

With Fundamentals Away, Technicals Rule the Day

Whether the cash market follows the futures screen or vice-versa is the source of considerable conjecture and debate in the natural gas market-almost on a daily basis. Although there have been times when futures have been the driving force in the market, many feel that cash prices, egged on by solid heating demand, have lifted futures prices out of the doldrums this month.

Prior to yesterday's trading the two markets sat neck-in-neck, with the Henry Hub average of $1.75 nestled up close to the April's $1.748 settlement Wednesday. That prompted sources to contend that the market rested at a delicate crossroads yesterday. Would prices continue higher; and if so would the cash market continue to set the trend? But the answer to that question was a resounding "no" yesterday. After the futures market received no early signal from the cash market, traders, armed only with technical analysis, deposited the prompt contract down 6.1 cents to finish at $1.687 on the day.

But the bulls did not go without a fight. A Houston trader pointed to heavy congestion in the $1.757-784 area, which contained the 18-, 20-, and 30-day moving averages, as a difficult hurdle for the market to move past. "The market tested resistance right off the bat [Thursday] morning, but the buyers ran into selling pressure and the rout was on," he said. However, he also felt that support in the $1.64-66 area, backed by eager commercial buying, could limit further losses.

However, Sandy Trot, of New York-based Trot Trading Corporation takes a more bearish slant. We saw everyone-funds, [speculators], and trade come out as sellers when [the market] hit $1.77." He continued by saying that if April is able to close below $1.70 (which it did yesterday) then the market could be in for more sustained losses.

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