Natural gas markets initially tried to rally during the trading session on Tuesday but ran into a lot of trouble at the $2.96 level. This is an area that has been a major resistance barrier over the longer-term, and it extends to the $3.00 level. As we approached this area, we rolled over rather drastically and rapidly, and in just a few short hours, we had dropped over a nickel. At this point, we are testing the $2.90 level, an area that has been important more than once. However, I also recognize that it is a minor support and resistance level, and that it makes more sense for this market to go looking towards the $2.85 level below, as it has been supported in the overall region.
I believe that longer-term we continue to have a lot of issues when it comes to hanging onto pricing in this market, because we have far too much in the way of supply. I think that every time we rally, it’s time to start thinking about whether we can hang onto those gains. I would look at the longer-term charts for directionality, and I think that we will probably go to the $2.60 level underneath, perhaps towards the end of summer. However, if we were to break above the $3.00 level, the market probably extends to the $3.10 level after that. Market participants continue to be very skittish and focus on short-term weather forecasts in the United States, so keep that in mind as well.