Natural Gas Markets Gap Lower to Kick Off the Week

Natural gas markets have gapped lower to kick off the trading week on Monday, slamming directly into the 50 day EMA. At this point, it is obvious that natural gas got way ahead of itself due to over excitement of traders with the storm hitting the northeastern part of the United States. The reality is that cold temperatures are almost completely gone, and it is probably only a matter of time before we see natural gas demand plummet. This is a seasonal problem with this market, and it is especially vicious in the United States, as the United States is more natural gas than it knows what to do with.

NATGAS Video 08.02.22

The gap above may get filled on some type of bounce, but that should only end up being another shorting opportunity. With that in mind, I continue to fade rallies but full disclosure: I short it at the open. I will add to a position as long as we do not breach the gap above. I believe that we are going to the 200 day EMA, and then after that we could go as low as $3.50 over the next several weeks. Remember, we are trading the March contract and as such we are starting to think about springtime.

I have no scenario in which I am a buyer this market, most certainly not at this time of year. I do not care if this market goes directly back to $5.50, I want no part of trying to buy a depreciating commodity. Over the longer term, I anticipate that we probably break through the $3.50 level as well.

For a look at all of today’s economic events, check out our economic calendar.