Weekly Natural Gas Outlook
Last week, December Natural Gas futures traded through the July 28 bottom at 3.877, putting the market in an extremely bearish position. Since there is still time before the start of the winter heating season, it looks as if this market still has work to do on the downside before becoming attractive enough for buyers.
As long as the product keeps coming into inventory and the cold weather stays away, the charts indicate that the market still has room to the downside. One target is the 2014 low at 3.0990. The next is last year’s fall bottom at 2.621.
Despite breaking through the summer low this week, there was no acceleration to the downside. This suggests that traders were prepared for the additional selling pressure and that there weren’t many long investors in the market to defend their positions or bailout on the weakness.
Because of seasonality, just about every speculator knows demand will come in once the weather experts issue their 90-day forecasts for the important heating areas. Until then, there is nothing to do but wait for bottoming action.
Those professionals who jumped the gun and went long early are probably adding to their established positions by entering on weakness and averaging down. Last week’s price action suggests fresh short-sellers are being tentative about selling weakness, but if prices continue to slide ever so slowly, there will come a time when they become more…