Natural gas markets fell again on Thursday as the downtrend simply will not relent. Inventory numbers did nothing to instill confidence, and half of the winter season in the northeastern Unites States has come and gone without even producing anything in the realm of serious snow, let alone serious cold. Because of this, the demand picture is extremely bleak for this season.
Normally, this market would be healthy this time of year as the demand from large cities such as Boston, New York, Pittsburg, Cleveland, Philadelphia, and Columbus would keep the market bid. However, with the recent discoveries of the massive natural gas deposits available through shale in Pennsylvania and Ohio, as well as many other fields in the US, natural gas is in abundance in the United States. In fact, the US is quietly becoming and energy exporter for the first time in decades.
As for the market, it is hard to argue with this trend. Any buyers of this market over the last year have been pummeled by the onslaught of selling. The 14 trillion plus cubic feet of natural gas that has been found in the United States certainly has this market struggling for the foreseeable future. One has to realize that Canada has almost as much natural gas as the US, and you can see how prices will be depressed for the foreseeable future.
Technically speaking, the market is far oversold. However, this isn’t the time to step in and be a hero by trying to buy the upcoming bounce. The pair is simply far too weak to even bother with that kind of trade. Rather, we are looking forward to the bounce as it will provide a higher level from which to continue to short this market.
The $3 level should now be massive resistance as it actually gave the sellers trouble last week, and this is simple common technical analysis – what was once support will now be resistance. The market will also find trouble getting past $3.25, $3.50, and $4. Because of this, selling rallies is simply the only way to go at this point in time.
Natural Gas Forecast January 13th, 2012, Technical Analysis
Originally posted here
