November natural gas futures tracked lower once again Wednesday along with major markets as investor confidence remained shaky despite a wave of global interest rate cuts. The Dow Jones Industrial Average fell another 189 points on the day, while November crude futures dropped $1.11 to close at $88.95/bbl and November natural gas futures shaved 2.6 cents to close at $6.742.

Bullish natural gas futures traders got off easy compared to where prices were trading Wednesday morning. At 9:20 a.m. EDT the November contract put in a low of $6.510, but then trickled higher from there.

“The natural gas futures market really got itself whacked over the last couple of days. Once we broke below support at $7.028, the next number was at $6.840, which we penetrated on Tuesday but failed to close below,” said Steve Blair, a broker with Rafferty Technical Research in New York. “We took out that support on Wednesday but were unable to close below the next support number at $6.590, which is quite an interesting spot. The $6.590 support number is based off of a trend line off of a weekly chart, which represents a stronger trend than one off of a daily chart. Our technical analysis shows there will likely be a little bit of play surrounding this price level, with a tolerance of a dime. I don’t think we will be able to say we have broken this support line until we close below $6.500. The scary part is, if we do get below $6.500, the next technical support doesn’t come in for another dollar or more to the downside.”

Followers of Elliot Wave analysis see the break below recent support as a sign of things to come. “We pegged the daily trend as down since natural gas was able to break below its multi-week congestion pattern,” said Walter Zimmerman of United Energy. He noted that “our trend is still bearish.”

According to Zimmerman’s calculations, spot futures may drop another 30 cents. “Our downside target remains $6.445 (0.618 x -A- = -C- if $15.780 to $4.050 is -A- and $13.694 is -B-) [of an A, B, C correction]. The bulls must hold the $6.445 to $6.115 area to have any hope of a Q4 rally.” Should the bulls be able to mount an advance, Zimmerman believes it will find resistance at $7.180.

Others see limited movement to the downside. “The market has broken its $7 to $8 trading range, but we are thinking it might rebound back to that area,” said a New York broker. He added that the funds were extremely net short and there was just too much risk going into the heating season holding a short position.

Taking a look at Thursday morning’s natural gas storage report from the Energy Information Administration, it appears that the industry is looking for another stout injection in the 80s Bcf area for the week ended Oct. 3.

“We’ve got five injection reports left in the traditional refill season,” said Blair. “If we get 80 Bcf a week put into storage, we’ll be at a very comfortable 3.5 Tcf or more, so storage does not appear to be an issue. This is not a far-fetched scenario unless some real cold weather comes out of nowhere. The National Weather Service’s six- to 10-day and eight- to 14-day forecasts are still calling for above-normal temperatures for a majority of the eastern portion of the country.”

A Reuters survey of 22 industry player produced a range of injection estimates from 78 Bcf to 95 Bcf with an average expectation of an 86 Bcf build. Golden, CO-based Bentek Energy said its flow model indicates an injection of 90 Bcf, which would bring stocks 5% below the five-year high and 2.3% above the five-year average. The research and analysis firm sees the East region injecting 49 Bcf while the Producing and West regions chip in 32 Bcf and 9 Bcf, respectively.

The number revealed at 10:35 a.m. EDT will be compared to a 68 Bcf injection from the comparable week last year and a 69 Bcf injection five-year average.

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