The June Nymex contract may have only slipped a mere 1.9 centsto $2.202 on Friday, but that small price change may loom verylarge indeed. By virtue of not settling above $2.22, “we’ve takenout and settled below the up trendline, establishing at least ashort term downtrend, if not a sideways trading range,” said TomSaal, Vice-President of Pioneer Futures in Miami. “I think themarket rode up to $2.70 because of speculative buying, and also onthe expectations of a hotter summer. Well, we haven’t met thoseexpectations yet, and now the market has tumbled back down,” hesaid.

“I think the market is going to approach psychological supportat the $2.00 level. The storage situation concerns me. It’s as ifpeople have been focusing on the short run, and the short run saysthere’s a big storage surplus. That surplus is preventing cashprices from doing much of anything,” Saal said.

In addition, Saal was only half-kidding when he pointed toanother potential bearish overtone, one he called the GasMarteffect. “When the industry has its gala events, the market has atendency to sink, presenting potential buying opportunities. I’mnot really sure why, but I’d guess because so many end-users andmarketers are at the show, there aren’t many buyers left at theoffice,” he said.

To make matters potentially worse, another analyst saidmarketers are going into May with a net long position. “That’s likeanother form of storage right there. It may not appear in the AGAreport, but it’s there nonetheless. I’d guess in 10 out of the last12 months, when marketers were net long, cash prices spent the restof the month falling, and vice-versa. If May proves to be noexception, then June’s [futures price] upside may be limited to Mayindexes,” he said. GPI’s May index for the Henry Hub came in at$2.26.

According to the Pegusus Econometrics Group of New York, thetechnical outlook looks “staunchly bearish in the intermediateterm. The Group offered its view in the May 1 edition of itsNatural Gas Report: “[Thursday’s] move to a new low in price wasconfirmed by a new low in the RSI, a sign of a healthy downtrend.The minor violation of the 2.16 low from March 16th is probably notsignificant as a rally from this level could still suggest a doublebottom. In the short-term we might see a bounce, but it is likelyto be a limited one. We see failed support at 2.25 as the firstresistance and more selling in the 2.30-2.355 range, with furtherresistance at 2.40. The market may be ready for some consolidationnow, but we think an eventual break under 2.152 will put pressureon spot support at 2.105.”

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