With the exception of a listless short-covering rally late in the session, trading Monday in the gas pit at Nymex was one bulls would like soon to forget. In addition to its 5.2-cent decline and $5.102 close, the August contract dipped below key support at $5.08, leaving technical traders to seriously consider if the long-standing uptrend in gas futures is over. At 53,067, estimated volume was light for the session.

After running prices higher and then lower last week as Tropical Storm Claudette approached the Gulf of Mexico, traders agreed that it would take substantial strengthening of the storm over the weekend to convince them to try the upside one more time. As it turns out, however, Claudette strengthened only modestly Monday and shut-in only about 1 Bcf/d of Gulf of Mexico production (roughly 7%) (see related story this issue).

Though the storm will still be in the foreground and could whip traders into a buying frenzy when updated forecasts/shut-in assessments are released Tuesday morning, the focus will now gradually shift to temperatures forecast for the remainder of July. While hot weather is predicted for the western half of the nation, the northeastern U.S. is expected to see below-normal mercury readings from for the end of July, according to the latest medium-range forecasts released Monday by the National Weather Service.

Also on traders’ radar screens is this week’s release of fresh Energy Information Administration storage data. Last week the market was stunned when the EIA reported a whopping 111 Bcf refill for the week ending July 4. However, warmer temperatures last week likely forced electric generators out into the market for natural gas, limiting the market’s injection potential. Expectations are centered on a refill in the 87-100 Bcf area. If realized, a number of this magnitude would be bearish, easily eclipsing the year ago injection of 69 Bcf as well as the five-year average of 76 Bcf.

Turning to the charts, August twice tried and succeeded in breaking below support at $5.08. Monday. That feat, combined with a gap lower open on the daily bar chart put the bears in the driver’s seat. Short-covering in conjunction with the psychologically important $5.00 level stemmed the slide, but technicals now point decisively lower and most market watchers say prices in the low to mid $4.00 still will be seen this summer.

On the upside, Friday’s $5.32 high is viewed as a pivot level to higher prices. Resistance at $5.41 or the downtrend line at $5.49 would likely cap the rally, according to Tim Evans of New York-based IFR Pegasus.

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