Despite a strong showing early in the trading session, naturalgas futures finished lower yesterday as traders grappled withcontinued low seasonal heating demand and an increasingly negativetechnical picture. At the closing bell, the newly crowned spotmonth December was 16.7 cents lower at $4.485, its lowest pricesince mid-August.

Mild weather across much of the U.S. was almost unanimouslycited as a reason for the price decline yesterday. Traders werealso quick to point to fund and local selling Monday. For Tom Saalof Miami-based Pioneer Futures, the lack of cool weather remainsthe bull trader’s largest obstacle. “Until we get some betterseasonal weather, lack of demand will continue to erode prices,” hesaid. “When we do get forecasts for below-normal temperatures, youcan bet that this market will rally. However, if it fails to takeout prior highs, you better watch out… It’s coming lower.”December futures reached an all-time high back on Oct. 12 at $5.87.

As the peak heating season nears, traders will becomeincreasingly attentive to the latest six- to 10-day weatherforecast, now released daily by the National Weather Service.Although more neutral than anything, yesterday’s revised forecastis more constructive than previous outlooks because it calls forbelow-normal temperatures across populous southern New England.Meanwhile above-normal temperatures are expected across the upperMidwest and also in the Southeast U.S.

However, weather will not be the sole price determinant goingforward. Traders are also cognizant of some key technical levelsthat if breached could spell doom for the 10-month long bull trend.Specifically, Saal has his eyes set on upward sloping trendlinesupport for December, which yesterday he targeted at $4.25. “If wetake that out, this thing is in real trouble,” he warned.

In the meantime, Saal recommends buying or selling in thedirection of the first hour of trading for a five-cent profitobjective or close out the position market on close. That strategy,he boasts, would have been a profit center both Friday and Mondayon moves in December contract from $4.685 to $4.735 and $4.64 to$4.69 respectively. Historically, he says it works about 80% of thetime.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.