Taking a trading path similar to the one seen last Friday, April natural gas futures traded a slim 14.5-cent range during Monday's regular trading session before settling at $7.254, up 1.1 cents on the day. Trading on Globex prior to the regular session also featured another failed attempt at breaching support down near $7.100.
After bouncing off a low of $7.124 in pre-regular session trading, the prompt month got no lower than $7.190 in regular session trading and ran up to notch a high of $7.334.
"What we saw Monday was another quiet session much like Friday," said Steve Blair, a broker with Rafferty Technical Research in New York. "There was some early morning action and then the market just kind of sat around. The market is still directionless in my opinion, much like it has been for the last month or so. It really seems to be trading back and forth between all of the technical support and resistance numbers."
Blair put emphasis on April's recent attacks on support levels. "Prior to the regular session's open, April natural gas put in a low down at $7.124, which is very close to our last minor support level," he said. "We were also just a few pennies off of last week's $7.100 low, but we saw the same reaction. We only stayed down there for a very short time before bouncing higher once again."
The broker also noted that it was interesting that natural gas futures didn't follow the plunge in crude futures. With concern surrounding the recent drop in Asian markets, April crude dropped $1.57 on Monday to close at $60.07/bbl.
"I think natural gas is back to playing its own game now," Blair said. "It played the crude game for a couple of days and then stopped. Natural gas did not follow crude up last week when crude rallied a couple of bucks and it did not follow it back down either on Monday.
"I really think natural gas futures is a technical market right now. For somebody who is trying to trade the market from a speculative standpoint, they are just playing the support and resistance numbers. Buy it when it gets close to the support numbers, hang on to it for a little while, and then sell it when it gets into the resistance numbers."
Commenting on the recent chill in the Northeast and Mid-Atlantic and the pending call for snow on Wednesday in New York, the broker said he did not think it would affect the market in the long-run. "It is not expected to stick around for too long, so I don't think this quick cold snap will affect the market that much unless it sticks around longer than intended."
In addition to the weather situation, traders are also assessing the overnight impact of falling Asian markets on petroleum trading. "Commodities are tumbling as the main driver of global demand is on shaky ground. Traders want to buy-in but they are fearful as they wonder just where this sell-off is going to stop," said Phil Flynn of Alaron in Chicago. He added that the petroleum markets in steadier times might rally on colder-than-normal March temperatures but the "real fear for the market is that Asia demand will dry up." Flynn queried just how well the Pacific Rim could handle a major market meltdown and said "a black Monday for Asia could mean dark days ahead for black gold. The market will just wait and watch the market in the U.S. and Asia."
As dire as things may be in the equity markets, natural gas traders suggest that April futures have a way to go before aggressive selling kicks in. "If there was a settlement below $7, I think there would be a large number of stop loss orders and a big sell-off." said a New York floor trader. In addition, he said that although it looked as though the bias of the funds and managed accounts appeared to the downside, "support is pegged at $7.195 and I think they would be good buyers below that."
For the week ahead, weather conditions appear seasonally turbulent, but no major outbreaks of cold air are expected. "Later this week, frigid air will continue to flood into the Northeast out of Canada, as the jet stream will remain dipped across New England," said AccuWeather meteorologist Brian Frugis. He added that warm air will begin to spread northward into the central Plains and Mississippi Valley, and "some wet weather will also move into the northern Plains as well, as Pacific storms dropping out of Canada push into the region."
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