Natural Gas
The natural gas market gapped higher to kick off the trading session on Monday as the market may have finally found itself in an oversold condition. That being said, the very first thing that we are starting to see is that the natural gas markets have fallen after this gap. And as a result, it looks like we are hanging around this area just above $3, trying to sort out where to go next. All things being equal, the 200 day EMA sits near the $3.30 level and probably offers a bit of a ceiling. This is an area that I think will continue to be important and I will be watching if we get anywhere near it. Signs of exhaustion should be selling opportunities and what is obviously a very negative looking market at the moment. All things being equal, if we were to break below the lows that we made last week then it’s likely that we could drop all the way down to the $2.20 level.
At this juncture, the market is dealing with the idea of whether or not there will be enough demand for natural gas out there due to the fact that temperatures are rising in the United States and of course Europe. So, it does drag down the demand and the price as heating is no longer a major factor. That being said, electricity is derived from burning natural gas in a lot of places in America. So if we start to get a recession in America, it’s likely that it will put downward pressure as well. This is a cyclical trade that I take quite often. And at this point, I am fully in the mode of fading rallies that show signs of exhaustion.