Continuing their ride on a slippery slide lower, May natural gas futures on Wednesday broke below the psychological $7 level after failing to move any higher than $7.14 in morning trade. After recording a low for the session of $6.97, the prompt month ended up settling at $6.978, down 11.6 cents for the day.

Once again, natural gas futures were ushered lower by serious weakness in petroleum futures, as crude attempted to break through a psychological barrier of its own. May crude stopped just short of penetrating the $50/bbl mark with a low trade of $50.06/bbl. The contract ultimately settled at $50.22/bbl, down $1.64. May heating oil and gasoline also continued their slides, settling 2.33 cents and 4.95 cents lower to close at $1.4420/gallon and $1.4843/gallon, respectively.

“There are lots of interesting things going on here,” a Washington, DC-based broker said. “We really hung around most of the day and collapsed at the end again. There were definitely more signs of weakness Wednesday.

“On Tuesday, we had a fairly big range, and the upper end around $7.39 was basically coming right up to what had been a support line, but now serves as a resistance line. It got within shouting distance of the support line on Tuesday, before failing and closing near the low on the day.”

Citing an old trading rule, the broker said a “long-term support line once pierced, becomes the resistance line.” He noted that the market very often breaks the support line, turns around almost as if there is seller’s remorse, then tries to regain the line but fails. “Everyone who missed selling it on the first time it broke support, looks and says, ‘Gosh, it’s right here again, now I’m going to sell it.’ That is exactly what they do and they end up overwhelming it; next thing you know, it’s down we go.”

He said while it is clear that the market is now in a bear mode and not a corrective mode, the question becomes: to what degree bear is it?

“Our first major support target is in that $6.80 to $6.88 zone,” the broker said, noting that $6.885 was the top of wave one in the five-wave Elliot Wave theory. “We are now in corrective wave four. This is not yet a bear market overall view, but a four wave correction is more than just a return to the support line within an uptrend. However, if we get through $6.80, then Elliot Wave theory says, ‘Whoops, this is something else.'”

Below $6.80, the broker said the futures market would meet “a lot of congestion” down in the $6.40 to $6.20 range. He noted that the selling could be accelerated Thursday if the storage report reveals a sizeable injection, which a number of market experts are calling for. The broker said he is looking for an injection in the 39 to 47 Bcf range, which would dwarf the five-year average injection of 1 Bcf and last year’s 16 Bcf contribution.

The ICAP-Nymex storage auction, which runs from 3-4 p.m. ET on Wednesday, produced an implied market forecast of a 45.1 Bcf injection.

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