March Natural Gas is up 5.6 cents at $5.741 this morning as I write, following yesterday’s 13 cent drop. The included chart shows that March Natural Gas is showing that $6.00 is becoming a strong resistance point for price rallies. The natural gas market has probably discounted all the cold weather news and near term cold weather forecasts already into its price. The directional movement indicators are still bullish but beginning to narrow and the ADX line is beginning to rollover to the downside. This is not good news for the would be bulls. I believe that the only thing in the near term that will save natural gas prices from falling is if weather forecasters come in over the weekend and forecast colder than normal temperatures well beyond January 10th. So far, this rally in natural gas from contract lows has stalled in the $6.00 area, about 24 cent shy of the highs made in late October. This should be very disappointing to the bulls considering the extra cold temperatures that have been experienced over the last couple of weeks. Remember, that the definition of a classic bull market is one that is making higher highs and higher lows. So far, the current rally hasn’t even reached the first important weekly high, which is in the $6.25 area. Bear markets are markets where prices are making lower highs and lower lows in price which is still the case here. This is only a rally in a bear market until proven otherwise. The other negative is the fact that all the further out delivery months starting in 2012 are trading within penny’s of their contract lows. Those far out delivery months have not participated in this near term rally whatsoever. I recommend standing aside for now in natural gas. As bearish as I sound, I still believe that natural gas is in the beginning process of building a long term secular bottom in prices. So, on the next selloff, I will be looking, once again, to attempt to position longer term positions in natural gas. I just need to get the right set up on the technical picture first.
David Hall
The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.
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