Following Monday’s 7.5% price retracement, the natural gasfutures market continued lower yesterday as short and long-termtraders added to newly established short positions. Cash prices,pressured lower for the second day in a row by record-setting hightemperatures, were also seen as a negative price factor. Afteropening at $2.64, the December contract quickly established a new4-month low at $2.59 before settling at $2.643, a 2.2-cent declinefor the day.

A Chicago-area trader who watched the mercury climb into the mid70s was content to sell into the futures slide yesterday. “This isa dangerous market to try to pick a bottom. Everyone I talk to is aseller and the weak cash market is giving them a spine. Coldweather is due to return by the end of the weekend, but all thatwill do is bring temperatures back to normal.”

However, warm weather was not solely to blame for the pricedecay, argues Ira Hochman of Trot Trading Corp. He contends thatwhile the market was able to post advances Friday, its inability topush through previous highs in the $2.90-93 area was very negative.”When the market opened lower, it was an easy sell,” he reasoned.

Another technician pointed to the long-term uptrend line, whichhe contends was violated on the open Monday morning as a reason forthe price slide.

However, in order for prices to continue lower, the market willfirst need to get past some potentially bullish storage data thisafternoon. Based on analysis of degree day heating data, ThompsonGlobal Markets (TGM) of New York looks for a net injection withinthe recent 4-13 Bcf range. A refill of that magnitude, the groupadded, would yield bullish comparisons against last year’s 34 Bcftally. TGM pegs resistance at previous support of $2.745, ahead oflast week’s $2.90-93 highs.

On the other hand, if the market is able to continue lower, itwill encounter support at $2.56 and $2.53, which correspond withlows from the daily December and weekly continuation chartrespectively, counters Hochman. “If the market gets below there, itcould get very ugly,” he warned.

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