Still reeling from a “devastating” weather picture the naturalgas futures market gapped lower on the open yesterday and continuedlower as traders added to short positions. By slipping 7.3 cents to$2.451 the December contract came perilously close to breakingthrough the lowest level of any spot contract since summer lowswere put in. The January contract, meanwhile, fared even worse,dropping 8.5 cents to finish at $2.596.

“This isn’t the point of no return, but you can see it fromhere,” said a Houston marketer incredulous at the 80-cent drop inDecember futures over the last 3 weeks. “You can only heap so muchbad news on a market before it breaks.”

A Dallas-based risk manager agreed and pointed to cold weatherthat never materialized last weekend, followed by more above-normalforecasts this week. And while warm weather in October gave peoplethe opportunity to inject gas into storage, that is just not anoption right now with storage nearly full, she added. However,despite the 93% full level as of Nov. 5, reports calling for a20-30 Bcf injection were being circulating yesterday. Because lastyear’s market experienced a 45 Bcf withdrawal, a build of thatmagnitude this year would create a 65-75 Bcf swing in theyear-on-year comparison, cutting in half the 120 Bcf deficit.

And the technicals do not look any better, she continued. “RSIhas fallen to 32.14, but it still has some way to go before itgives off buy signals. I would look for the RSI to get down to aslow as the 4-5 area, with futures falling between $2.30-35, beforetrying to pick a bottom.” Developed by J. Welles Wilder, the RSI orRelative Strength Index estimates the current strength or weaknessin the price movement by calculating the difference between the sumof all up closes and all down closes during a set trading period.While NGI uses 14 days in computing the RSI, some technicians willuse a shorter trading period because of the high volatility innatural gas.

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