After reaching a two-month high for the spot contract on Tuesday at $4.494, the resulting tumble that began Tuesday afternoon spilled over into Wednesday’s regular trading session as June futures plummeted 18.4 cents to close at $4.158.

Traders and market watchers weren’t ready to begin eulogizing the recent bull move just yet and there was some significant debate as to whether the hooves and horns crowd have the right technicals and fundamentals to support their case.

In a technical versus fundamental showdown at the U.S. Energy Services’ Energy Game Plan 2010 conference in Minneapolis on Wednesday, Larry Marshall, president of Resource Securities Corp., said a “significant buying opportunity” is presenting itself. “Looking at the cyclical and seasonal patterns of this market, it is clear that natural gas is in the process of notching a multiyear low and forming a base from which to move higher. If you are a hedger, the last train will leave the station sometime between Labor Day and the October contract expiry.”

Meanwhile, Stephen Smith of Stephen Smith Energy Associates argued the fundamentals case, which he believes also could point to higher prices down the road. “If cooling degree days and hurricanes don’t show up this summer, we could be dealing with a real storage crunch and lower prices,” he told attendees. “It is not unreasonable to say that prices under that scenario will replay last fall’s weakness. However, at those prices, producers will shut in production, the rig count will decline and I expect prices to rebound by 75 cents to a dollar [over the average 2010 price]…to average $5 or so in 2011.”

Looking at the near term, Rafferty Technical Research broker Steve Blair told NGI that Wednesday’s decline came as no surprise.

“Futures finally gave way Wednesday and all I have to say is it’s about time,” Blair said. “Honestly, there’s no reason for the market to have been as strong as it was. We had two major resistance numbers at $4.420 and $4.500. While we penetrated $4.420 and tested $4.500 twice on Tuesday, we failed and ended up closing back below $4.420. With that knowledge, Wednesday’s retreat came as no surprise. On the downside, $4.150 is our first major support level followed by $4.”

Blair noted that Tuesday’s activity was crucial to the market’s next move. “From a technical perspective, a close above $4.500 would leave the door wide open for prices to move a lot higher. Our technicals are showing a close above $4.500 could propel the market up to $6. It would also go a long way toward assuring the bulls that they are in control.”

At least one analyst sees the bulls getting another bite of the apple in the immediate future. “The natural gas market has tipped back to the downside after what looks like a failed attempt at breaking its recent equilibrium to the upside,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “The market may have another chance or two to try the upside again as we anticipate a below-average net injection to U.S. natural gas storage for last week and there is some added air-conditioning demand coming up next week across much of the northern U.S., although we see such support as temporary.”

Citing Frontier Weather’s six- to 10-day outlook covering May 24-28, Evans said below-normal temperatures are expected to be widespread on the West Coast while above normal readings will be found from the plains through the Mid-Atlantic and Northeast. Frontier Weather predicts some variances in near the Great Lakes to be as much as 12- to 16-degrees Fahrenheit warmer than normal.

“In our view, the natural gas market would need ongoing weather-related support in order to sustain a rally, and while that’s a possibility, it’s not necessarily a high-probability scenario at this juncture,” Evans added.

Taking a look at the Energy Information Administration’s Thursday morning storage report for the week ending May 14, Evans said he is expecting a 70 Bcf injection, which would be smaller than both last year’s date-adjusted 101 Bcf build a year ago and the five-year average addition of 93 Bcf.

A Reuters survey of 25 industry players produced a 68 Bcf to 98 Bcf range of injection expectations with the average build estimate coming in at 77 Bcf.

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