By FXEmpire.com
The natural gas markets fell slightly for the session on Monday, only to bounce from the lows and form another hammer. It appears that there is a bit of a struggle just above the all-important $2 level. The area should naturally produce a reaction as it is a large round number, and many traders will be caught in the “It can’t possibly go any lower” trap.
The fact is that the market is falling like this for a reason: supply and demand. The market rarely is this cut and dry, but the natural gas situation is very obvious. The supply of natural gas is simply far too large in order for the demand to ever come close to exhausting it. The United States and Canada both have been finding more and more supplies over the last year or two, and with new drilling techniques, the amount of available natural gas supplies should only increase as time goes on.
As a side note, in the United States there was a live demonstration on television during the session on how easy it is to convert a car to run both natural gas and gasoline. The ability to do this is simple enough that a reporter did it on the air, and with minimal effort. The average American has natural gas (160 million homes) as a heating source in their house, and it takes very little to convert a garage into a fueling station. With this new paradigm, we may be seeing the start of a serious shift in the Americas when it comes to the economy.
As a result of all of the oil and natural gas finds in the Americas will someday have the US dollar acting as a petrocurrency like the Loonie or Norwegian Krone. With this in mind, there are big changes to come. However, until this becomes a more common scenario, we are looking at low gas prices. Experts think that natural gas will be used much more in the automobile in a few short years.
In the mean time, we are selling rallies at this point, as the trend is most certainly down. The $2 level should produce a bounce, and this will simply give us a change to sell at higher levels on signs of weakness.
Natural Gas Forecast April 10, 2012, Technical Analysis
Originally posted here
