technicals

Yesterday was a swingin, Up-N-Down day for natural gas.  See the Updata ‘Candlestick-Volume’ chart for the CME/NYMEX May contract below, that shows upticks in gray, downticks in red, with the width of the bar proportional to the volume during that trading period.  So there was a big move up on the open, it was pounded down during the morning session on relatively consistent volume, then drifted back up before closing above the two dollar mark at $2.016, up 3.5 cnts.  The futures market spent 3 days below $2.00 this time around. Yes, I’m suggesting that we have not seen the last of one-handle prices.  For reference, cash markets didn’t seem so enthusiastic with the ICE prompt cash Henry Hub index languishing back at $1.88/MMbtu, up a penny.

Yesterday April Natgas rolled off the board closing with still another 10 year low, and the third official day of April bidweek wrapped up a weak trading session. Day-gas cash prices are in the dog house.  It is EIA storage day, and a higher than expected build could be on the way.  There is nothing about the natural gas market that looks bullish.  Nevertheless, there has been no price collapse.  In fact, natty has been range bound for weeks now.  Do we know any more than we did two months ago?  Let’s put the current situation in a historical perspective.

On Tuesday, NYMEX April natural gas fell 5.2% to $2.355/MMbtu, which was 3.3 cnts above another 10 year low “target”. Prices have been hitting decade lows on the way down. So the new low was bait for the bears if you ever saw it.  Yesterday the market opened at $2.34 and in 72 minutes fell to $2.28, or 6 cnts/MMbtu.  I was in NYC speaking at the Morgan Stanley MLP conference and could hear screams from the street – “It’s the end of the world as we know it!”  The market seemed to be gunning for $2.20 which would have blown through all sorts of technical supports and targets.  Of course, it would also be consistent with the huge overhang in storage inventories that has been a frequent topic in RBN postings over the past few weeks.