Natural Gas Technical Analysis October 11, 2011

Natural gas markets rose on Monday in a rare show of strength for what could possibly be the most beaten up market out there. The fundamentals are still very bearish in this market, as the USA by itself has over 14 trillion cubic feet of proven gas in the wild. The supply that is proven should be able to power the US for well over 200 years, and this will be a massive overhang for this market for the long-term.

The recent breaking of the $4 mark was a significant break of significant support. Once that area gave way, we had measured the previous consolidation area between $4 and $5, and projected a downside target of $3 for the intermediate-term. The market looks very sick indeed.

The bounce during the session on Monday looks set to be a “dead cat bounce” that the sellers will more than likely step in and get short from. The market continues to offer selling opportunities every time the market bounces, and we think this should continue to do so. The market should continue to fail at the larger “round numbers” such as the 3.75 and 4.00 levels. Any signs of weakness should be sold in this obviously broken market.