After gapping lower on the opening bell, natural gas futuressifted lower Friday as traders continued the sell-off that begantwo and a half weeks ago. With Friday’s $4.541 settlement, theNovember contract concluded its tenure as prompt month on adecidedly negative note, down 12.3 cents on the day and $1.24 offits Oct. 12 high-water mark.

Traders were surprised last week that despite the appreciablelosses levied on the natural gas market over the past few weeks,prices were unable to bounce in pre-expiration short covering. Andwhile most sources polled by NGI were in agreement that Novemberwould rebound Friday, the weak opening trade set the tone onexpiration day and commercial selling was seen to usher priceslower. Not only did the November contract gap lower on Friday’sopen, but it also gapped below support at $4.64. Market watchershad targeted the $4.64 level as support because it represented thesecond high of a double top formation put in back in June on theNovember chart. On Thursday, $4.64 was the market’s low trade.

Looking ahead, traders agree that weather forecasts will have alot to do with whether prices continue lower or retrace higher.According to the latest six- to 10-day forecast released Friday bythe National Weather Service, much of the nation will continue tosee normal and above-normal readings through the weekend. However,bulls are hopeful that a large area of below-normal temperaturesthat covers much of the western third of the U.S. will migrateeast.

On the technical side of the market, George Leide of NewYork-based Rafferty Energy Group admits that while the market couldbe in the midst of a major collapse, he refuses to rule on thatuntil technicals send off truer sell signals. “Following thewash-out, I expect prices to consolidate in the short tointermediate term between current levels and the $5.20-30 area.”Specifically, he targets support for December natural gas first at$4.53 and then again at $4.395. On the upside, resistance is seenat $5.31, he said.

Also cautiously rearing his horns is Tim Evans of New York-basedIFR Pegasus. For Evans, the key is whether December can punchthrough the mid $4.70s area despite the likelihood of more negativenews Wednesday. “We think Wednesday’s AGA report will likely showanother 50-60 Bcf in last minute injections ahead of the pendingwithdrawal season, with a bearish comparison relative to theminimal 4 Bcf from a year ago… An upward reversal past $4.75-78might be enough now to turn the tide for the short-term, as anindication that the selling has been exhausted and the shorts arevulnerable for at least an upward test.”

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