Natural gas markets have plunged during the Monday session as we continue to see a lot of negativity. Quite frankly, the issue seems to be that the market is pricing in some type of major recession, and that means that we will have less demand for energy. This will be interesting though, because sooner or later Europe will have a cold winter, and natural gas markets will spike, but that has not happened quite yet, and therefore it’s time to simply sit on the sidelines. I would not short natural gas at these extraordinarily low levels, but as of this morning I closed out my ETF position at basically breakeven.
At this point, I think there probably are some buyers waiting to get involved, but we have broken a major trend line, something that doesn’t look very good. Natural gas markets tend to move on weather patterns, that of course is something that’s going to be difficult to pay attention to, as it is very noisy. That being said, the market took off quite drastically, and then just petered out as there’s almost nothing out there to push the market at the moment as traders seem to be focusing on the lack of electricity demand.
We are approaching the 61.8% Fibonacci level near the $2.45 level, which is essentially the “last stand” for buyers of this market. That being said, if we turn around and take out the $2.80 level, then I think the bullish trade can continue, but right now looks like we are going to have a lot of issues that we have to chew through in the meantime.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.