Natural gas prices again came under selling pressure Monday astraders dealt with below-normal temperatures both outside theirwindows and also in the forecast. After gapping lower at the open,the August contract sifted lower throughout the session and dippedbriefly below key psychological support at $4.00 before closing at$4.002, 14.8 cent lower on the day.
Mild temperatures and low humidity were seen across much of thedensely populated East Coast yesterday, and those conditions areexpected to continue. According to the National Weather Service,the eastern third of the country except Maine and Florida isexpected to see below-normal readings through the middle of nextweek. Meanwhile, areas West of the Mississippi River are forecastto see above-normal temperatures.
“We are at the moment of truth,” announced a Houston-based riskmanager referring to the peak cooling demand period that runs eachyear from July 15 to August 15. “We have seen very moderatetemperatures East of the Mississippi and the market is beginning toreflect that.”
And unseasonably cool temperatures are not the only factorstipping the scales in bears’ favor — technicals are starting topoint lower as well. Not only did August pierce support at $4.00,but it also settled below its 40-day moving average for the fourthday in a row. Historically, non-commercial traders have used the40-day moving average as an indicator for when to enter or exit themarket. When the prompt month dips below it’s 40-day average, theysell, and when it moves above, they buy. According to the lastCommitments of Traders report released Friday by the CommodityFutures Trading Commission, non-commercials were net long only12,000 contracts, which means that they are in a good position toreverse to the short side of the market now.
On the daily charts, New Mexico-based Kase and Company seessupport first at $4.00 and then again at $3.80. A break below $3.80would, in their opinion, kill the bullish pattern. However, if themarket just dips into the $3.70s and fails to close below $3.80,”there may be a glimmer of hope for a recovery in the medium term.If not expect a much deeper move,” the group wrote in its KaseFaxon Gas dated July 14.
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