Not content with the prior session’s punch below the psychological $3 price level to a seven-year low, the bearish natural gas futures movement found follow-through on Friday to notch a new low for the move at $2.776 before closing out the day at $2.804, down 14.1 cents from Thursday and 43.4 cents lower than the previous week’s finish.

The week’s streak of weakness has surprised a number of market participants, especially when taking into account Thursday’s bullish 52 Bcf natural gas storage build for the week ending Aug. 14, the fact that crude futures values hit a record high for 2009 during the week, or the reality that a number of large eastern gas usage markets are finally baking under some real summer heat.

“It’s pretty hot in the East but you wouldn’t know by looking at natural gas prices,” said a Washington, DC-based broker. “I was definitely surprised that we broke lower on a moderately bullish storage injection number. We rallied for 35 seconds on the number, but the true bearish sentiment revealed itself and we pushed lower. We certainly followed through on Friday, despite the fact that crude futures continue to head skyward.” October crude futures added 98 cents on Friday to close at $73.89/bbl.

The broker was quick to point out that this is “not your grandad’s energy futures market,” adding that, “The dynamics of the last 30 years in the gas market have changed. Hurricanes have lost some of their luster because so much of our production plays are now onshore,” he said. “We could get a Category Five hurricane heading through the Gulf, but it is not going to effect western Pennsylvania. There is an awful lot of slack built into the natural gas system now. We also have slack from LNG capacity. We don’t live or die by Gulf of Mexico supply anymore. You can not fall prey to saying the market will be like it always has been, because things change.”

While it would not appear that there could be much more room left open to the downside, the broker said he believes it could drop by more than a dollar. “An Elliott Wave calculation of a fifth wave lower gets us down into around $1.700 as a possible termination point for the move,” he said. “That possibility was opened up when we broke the old low of $3.155. Some old support points from more than seven years ago also come around in the $1.600 area, so the $1.600 to $1.700 range is our next major support area.

“I didn’t think we’d get this low. I personally thought the $3.20s would hold. At the end of the day, I’m still a bull in all this because I think this move lower sets the stage for a gargantuan rally. Natural gas is the scalable green solution and it is the scalable energy security solution, but right now T. Boone Pickens and his gas crusade aren’t getting any traction while we’re still having shouting matches on health care. We also have to take care of straightening out the financial system. As I see it energy is at best third on the block and we’ll see if Obama has any bullets left at that point.”

Others agree that the downside remains open for business. “The daily, weekly and monthly candlesticks show no evidence of bottoming action,” said Brian LaRose, an analyst at United Energy. According to his calculations the natgas minus coal spread (BTU adjusted) has been targeting a further reduction in the price of gas. “Now our $3 key support has been broken. Based on our various wave count models $2.282-1.964 is our nearest cluster of potential support,” he said in a note to clients.

Traders look like they will be able to take their eyes off the storm front for at least a few days. Hurricane Bill looks like it is on a collision course with Cape Cod and Nova Scotia and two tropical waves are currently showing no growth, according to AccuWeather.com.

The natural gas market by way of the general U.S. economy received a bit of bullish news on Friday from the National Association of Realtors (NAR) report on existing home sales for the month of July. The report showed that the sale of previously owned single family homes was up 7.2%, which is the largest gain ever recorded, according to NAR. July was the fourth consecutive month of gains.

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