Natural gas markets were volatile at the open on Monday, breaking down to the $2.65 level. The market has since rallied rather significantly, and we are now starting to see bullish pressure. I believe that the market will then go to the $2.75 level. I believe that if we can break above there, the market can then reach towards the $3.00 level, an area that I would be much more interested in. Longer-term, I have no interest in buying this market and I look at these rallies as selling opportunities. I believe that the $3.00 level above will be very difficult, and a break above there would be a bit surprising.
Even if we break above the $3 handle, I believe that there is plenty of resistance at the $3.25 level. At that area, I believe there would be even more sellers. Remember, we are leaving the busy season for demand, and I believe that the demand for natural gas will only fall from here. I believe that most of the rally that we are seeing right now is due to a bit of short covering, because we did fall rather precipitously. After all, the market can go in one direction forever, so it makes sense that we should get a bit of a bounce. However, I look at that as an opportunity to start selling again. I won’t be bothered buying this market, but short-term traders may be willing to pick up little scouts here and there to the upside. I believe most of the gains will be to the downside.