Natural gas futures trading at the New York Mercantile Exchangestarted the week slightly on the down side Monday, as bearishfundamentals once again set the tone for a weaker trading session.The March Futures contract opened down 4.2 cents from Friday’ssettle, and continued the day trading in a tight 5-cent range toclose down 3.3 cents at $1.744. “As far as fundamentals areconcerned, the outlook looks bearish for this contract,” one tradersaid. “You have extremely mild weather and no support at Nymex and,certainly, storage numbers are still significant.”

However, from a technical standpoint, some see signs of a shiftin direction to the upside for both the near and long term. “In ashift from the volatile chop that has dominated natural gas tradingover the past six weeks, we think the market may be close to ashift that will send prices trending higher, and in a moreconsistent fashion,” the Pegasus Econometrics Group’s wrote in theFeb. 1 edition of its Natural Gas Report. To wit: Friday’s CFTCCommitment of Traders Report showed an increase in fund shorts andthe year-on-year surplus in AGA storage has been greatly reducedfrom where it was six weeks ago. “The ground work has been laid forthe typical seasonal rally.” Furthermore, “if March holds abovelast week’s $1.732 low it will help create the impression themarket is firming,” the Group added.

A New Jersey analyst agreed and noted that “while sellerscontinued on their activity from Friday, pushing the market down to$1.725, short term support at $1.73 kicked-in to prevent a furtherdecline. The reason is that the market is technically oversold.”But if March is to move significantly higher, the analyst feels thecontract will have to settle above major resistance marked by thedown trendline at $1.85. “Locals will likely try to take the markethigher on any move above $1.80, but if they fail to get March muchabove $1.85, look for an easy move back into the mid $1.70s,” headvised.

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