Natural gas futures values continued to plod lower on Tuesday as much of the country has begun to see the first signs of spring. The April contract reached yet another new low for the down move before closing the regular session at $4.347, down 4.4 cents from Monday’s finish.

The front-month contract recorded a $4.323 low on the day before inching higher to close. The last time a front-month contract traded lower was on Nov. 20, 2009 when the December 2009 contract reached a low of $4.220. Since reaching a high of $6.108 on Jan. 7, 2010, the front-month contract’s value has dropped $1.761, and most market watchers expect to see futures drop at least a little further.

“I think we could fall a bit lower, but I don’t think there is a whole lot of room left at this point,” said a Washington, DC-based broker. “We’ve been looking at support at $4.260 for awhile and we slowly appear to be getting there. Despite April crude shooting $1.90 higher to $81.70/bbl during Tuesday’s regular session, the enthusiasm didn’t transfer to natural gas. We are now well on our way into the shoulder season; so this is the lackluster type of natural gas market we normally see.”

The broker noted that the $4.260 price level stands roughly as a 50% pullback from the September to January rally. “We seem to be slowing our rate of descent within the last week, so perhaps $4.260 holds as the 50% pullback,” he told NGI. “Some of our indicators are flirting with crossing over in a bullish way, but then again these indicators similarly flirted for a good part of February and then sold off another buck. It is important to note that flirtations make for harsh mistresses; you have to wait for the actual crossover.”

He noted that a majority of the current indicators don’t hold much hope for the bulls, but following a slowdown in the decline, bounces can come out of nowhere. Looking at Elliot Wave five-wave theory, the broker said it appears the market is in a third wave lower, which is the “most powerful” of the waves.

As for the talk of a break below $4, the broker said he puts the chances at 30-40%. “If we were to break below $4.260, then $3.820 is the next support level. That price level is from a price gap back in September, which was caused by a contract change during the big rally,” he said.

Going into Tuesday’s trading, some top traders were expecting uninspired business, according to Jim Ritterbusch of Ritterbusch and Associates. He added that one- to two-week temperature forecasts “appear to be shifting from bearish to neutral, [but] this week’s mild patterns are maintaining downside pressures on the physical trade that saw cash prices sliding below the $4.30 level at the start of this week.”

Those mild patterns are causing heating requirements to not only fall seasonally, but the decline is also greater than would normally be expected for this time of year. The National Weather Service forecasts below-average heating requirements for Northeast and Midwest energy markets. For the week ending March 20 New England is expected to see a modest 115 heating degree days (HDD), or 89 fewer than normal, and New York, New Jersey and Pennsylvania are expected to have just 137 HDD, or 48 fewer average. The Midwest from Ohio to Wisconsin is expected to have 134 HDD, or 59 fewer than normal.

Economy bulls were pleased with the 8:30 a.m. EDT release of February housing starts by the Commerce Department. Expectations had been for starts of 565,000 annual units, just fewer than February 2009 starts of 574,000, but the actual figure was 575,000. January starts were 591,000 units.

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