Stopping the rally from last week at least temporarily, August natural gas futures on its way towards expiration dropped 17.7 cents on Monday to close at $5.957. The drop almost erased last Thursday’s 22.1-cent rally, which was sparked by the first bullish natural gas storage report in many weeks (see Daily GPI, July 23).

The prompt month did most of its selling-off before noon, using the rest of the afternoon to bounce between $5.98 and the low on the day of $5.94. September futures gave up 19.5 cents on the day to settle at $5.996.

“After the morning, we really just sort of laid here for the remainder of the day. The market was sort of uninspired after lunchtime,” a Washington, DC-based broker said. “Believe it or not, you could still argue that we have not yet completely collapsed on the little bit of an uptrend that we were trying to build. I would still say that the jury is out. We are not guaranteed to be pounded back to $5.80 and below.

“I think that $5.80 down into the $5.70 range looks pretty solid,” he said. “I am not ready to throw in the towel on my bullish call from last week. I still think we might have an upleg to go here. If we really bust through that $5.80 level with some steam headed toward taking out the $5.70 mark, I would say that I am wrong.”

Despite Monday’s actions, the broker noted that his Eliot wave chart still counts this as a possible fifth wave up. “The very bearish scenario in natural gas that one would think you might have given the weather and storage fundamentals just isn’t getting any chance to develop because of the high price of crude. Strange things happen on the way to winter. Sometimes natural gas just runs out of chances to sell off.”

After trading within a range of $41.05-$41.70, September crude settled at $41.44, down 27 cents on the day.

“Gas gave up trying to move above $6.28 and the short-term trend turned down, rejoining the direction of the intermediate term,” said Craig Coberly of GSC Energy. The analyst said he suspects that this is the start of the decline that will reach the long-term Gann support line as the intermediate term trend bottoms. For this week, that long-term support line ranges from $5.51-5.20.

“Trading above 6.28 would not fit the bearish outlook and I would say the bearish outlook was incorrect,” he said. “If gas closes above this resistance line, I’ll likely conclude the intermediate term trend is higher and a move into the $7.50 area will be likely.”

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