In reaction to forecasts calling for moderating temperatures and in anticipation of Thursday’s release of fresh storage data, natural gas futures slumped Wednesday amid light long liquidation. And although the March contract finished with a 11.8-cent decline for the session to close at $5.644, it remains in an uptrend on the daily chart. Estimated volume was heavy, with an estimated 101,308 contracts changing hands.

According to the latest eight- to 14-day outlook released Wednesday by the National Weather Service, normal temperatures will be seen over the eastern half of the country, while continued above-normal mercury readings will be experienced by western states.

With little fresh information on which to trade Wednesday, market-watchers turned to technicals to explain the market’s retreat. “[The March contract] held the uptrend and you have to respect that,” said Tom Saal of Commercial Brokerage Corp. in Miami. “Market Profile gave us a 3-2-1 or ‘b’ formation [Wednesday], and that implies long liquidation.”

Devised by stock market technician Pete Steidlmayer, Market Profile attempts to predict a market’s fair value using its recent history of price action plotted versus time. A “b” formation is consistent with a market that spent most of its time at the lower end of its daily trading range. One of the Market Profile’s features, Saal continued, is that it does decent job of predicting the market’s move if it breaks out of its initial weekly balance. Because prices traded in a 40-cent range on Monday and Tuesday, Market Profile calls for a 20-cent (50% of 40 cents) continuation to the downside or upside respectively if the $5.48 low or $5.88 high is breached.

However, technical market dealings and gyrations will be put on hold, at least for a while Thursday morning as the market digests the latest storage data from the Energy Information Administration. Expectations ahead of that report have not changed since the beginning of the week as traders look for a 170-210 Bcf withdrawal. While a number of that magnitude would easily exceed the year-ago draw of 78 Bcf as well as the five-year average pull of 111 Bcf, it would fall short of the prior two weekly withdrawal figures of 247 Bcf and 219 Bcf.

At 1,729 Bcf on Jan. 24, stocks were 681 Bcf less than last year at that time and 190 Bcf below the five-year average. Going forward, traders agree that less emphasis will be placed on the weekly tallies, and more on the expected ending inventory levels on March 31. Accordingly, expectations are focused on a March 31 inventory of about 900 Bcf, well below the five-year average of 1,190 Bcf.

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