For the second trading session in a row, natural gas futureswere hit with a wave of selling pressure Monday, as bears basked inthe glow of forecasts calling for continued above-normaltemperatures across much of the country. After showing earlypromise last week in trading up to $2.485, the January contract hassince slipped to new life-of-contract lows, closing at $2.224yesterday. Activity was with 69,325 contracts changing hands.

Of considerable interest to many market watchers was thecash-futures spread, which continued to compress Monday. “Cash wasstrong right off the bat, but that didn’t seem to affect Januaryfutures which was 6 cents lower at the open,” a Dallas-based tradersaid. The spread has compressed from as wide as 40 cents lastThursday to just 3-4 cents Monday. She went on to explain that thefutures price decline can be attributed to traders taking the coldwinter premium out of the market. “For the past 3 months futures[have] been trading at a significant premium to cash on theexpectation of a normal or below-normal winter. Now that it isDecember and winter has yet to show up, people are jumping ship,”she continued.

Only slightly less bearish than the fundamentals are technicalfactors, and according to New Mexico-based Kase and Company, oddsremain good for a continuation lower. “The existence of bullishreversal patterns on the weekly charts tell us that psychologicallythe market would like to recover. However, it is not finding thestrength to do so,” the group wrote in its KaseFax Monday. “Bearishsigns include a triple top at $2.485 in January as well as itsfailure to close over the very important $2.42 test level.” Basedon that, the group believes the market has a 90% chance of tradingto the $2.17-24 area this week, with downside targets of $2.15 and$2.10.

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