The natural gas markets broke down significantly during the trading session on Friday, as it looks now like we are ready to down to the $2.50 handle. I think the $2.75 level above is significant resistance, so any time we rally between here and there, I’m looking for signs of exhaustion that I can start selling again. With this in mind, I think that the overall attitude of the market is going to continue to be negative, but if we break above the $2.75 level, it’s likely that we will see the $3.10 level offer massive resistance.
I think that the $2.50 level is essentially the “floor” in the market, but if we were to break down below there are things could give catastrophically negative. I think we will reach down to that area though, so that’s why in selling the rallies after this negativity. When you look at the hourly chart, I think that the oversold condition on the stochastic oscillator will eventually cause the market to bounce, but I think more than likely we get short-term selling, followed by intermediate positivity over the course of the next several sessions. Nonetheless, it looks as if the natural gas markets are in a significant amount of trouble.