Armed with bearish technical data and fundamental news, traders at the New York Mercantile Exchange wasted little time yesterday as they pressured natural gas futures back below the psychologically important $3.00 mark. Selling was seen from the outset Monday, as traders initiated the daily session with a whopping 14-cent, gap-lower open on the daily chart. The December contract never recovered, sifting lower through the morning only to move sideways during the afternoon. The prompt month closed at $2.922, down 32.6 cents for the day.

For many traders, the decision to sell Monday was a no-brainer. “Nobody I talked to could give me any good reasons why the market was able to rally last week,” a cash market trader said. “When we came back in [Monday] morning to find that all the news was still bearish, the market just crumbled,” a source said.

The most identifiable factor that remains undeniably bearish is the short- and medium-term weather outlooks. According to the latest six- to 10-day forecast released yesterday by the National Weather Service, above-normal temperatures are expected across almost the entire country through the middle of this month. And while long-lead winter outlooks by prominent industry meteorologists call for a cool down in the latter half of the month, intermediate-term forecasts like this one are beginning to erode the credibility of those winter predictions.

Also of impact in Monday’s session was the news that the non-commercial segment of the market had not yet covered their short positions, leading some analysts to suggest that they had not given up on lower prices. According to the weekly Commitments of Traders report released after the close of trading Friday by the Commodity Futures Trading Commission, non-commercial traders still held more than 14,000 net short positions as of Oct. 30, down only 4,241 contracts from the week prior. “There was a great deal of sympathy buying by traders who believed that the funds had covered their shorts and would now begin to accumulate longs. When the CFTC report showed otherwise, it cast doubt on their decision to be long. I bet that they were the first to head for the exits this morning,” a seasoned risk manager hypothesised.

In daily technicals, support is seen at December’s $2.835 low from Oct. 24 ahead of trendline support at $2.76, according to IFR Pegasus. Resistance exists at Monday’s high, followed by more selling in at the top of the chart gap up to $3.22.

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