December natural gas futures shot higher in Monday morning trade, but some market-watchers were unconvinced that the move was anything more than a one-day diversion in the larger down move. The prompt-month contract finished at $4.614, up 22.2 cents from Friday’s close.

After beginning the day’s regular session by notching a low of $4.382, the December contract shot higher from there. The contract put in the session’s $4.656 high just minutes before the close. Despite the run higher, current fundamentals and technicals both appear to be favoring the bears in the near term.

“Monday’s uptick was impressive, but it was not large enough to sway my current opinion on this market,” said a New York broker. “With gas storage sitting at all-time record levels north of 3.8 Tcf and colder winter temperatures still absent for much of the country, I’m still of the belief that prices have a little more room to the downside. However, the market has proven that it doesn’t always follow its own indicators.”

In Kase and Co. Inc.’s weekly technical analysis released on Friday, analyst P. Dean Rogers said while there likely would be a countertrend day here or there where futures prices move higher, technicals point to a continuation of lower values.

“The outlook remains negative and although $4.25 is strong support, the primary scenario calls for a continuation down to at least $4.15 followed by $4.00 and possibly $3.84,” Rogers said on Friday. “There are no signs that the drop in prices will end soon, but the technicals indicate that about a 30% chance exists for a correction to $4.56 and even $4.81 before the move lower continues.”

However, Rogers warned that a close above $4.81 would change the layout and could bring on a move to $4.93 and “eventually” $5.34.

Some analysts saw December’s plunge last week to new lows as influenced by producer hedge selling. “There are a lot of natural gas companies that have production costs which are way too high at this time. The rallies have been short-lived because these companies feel tremendous pressure to sell on the rallies,” said Mike DeVooght of DEVO Capital, a Colorado-based trading and risk management firm. Those that are waiting for the gas market to put in its seasonal high may have missed the boat. “Fundamentally and seasonally the gas market usually puts in its seasonal high by early to mid-November. This year, it seemed to put in its high a couple weeks early.”

After putting in a low of $2.409 on Sept. 4, front-month natural gas futures ran up nearly $3 to a high of $5.318 on Oct. 21.

Traders sensing the demise of the producers may be pressing the issue further. The Commodity Futures Trading Commission reported Friday that for the week ended Nov. 9 long and short positions consisting of combined futures and options held by managed money increased but with a heavy lean to the short side of the market. Long positions increased by 7,399 contracts to 137,954, but shorts increased a stout 12,492 to 180,414 contracts. For the five trading days ended Nov. 9 December futures fell 15.4 cents to $4.670. Traders note, however, that selling at such low prices can be risky, and typically managed money will not take possession of futures contracts.

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