Natural gas markets managed to gap down on Monday, which was a holiday in the United States as most traders simply weren't involved. Because of this, it is hard to come up with any bullish case for this market presently.
The warmer than usual weather in the northeastern part of the United States is absolutely killing demand for the fuel, as it is used in large quantities by that area for heat. The addition of various new massive finds of natural gas in the US has really destroyed the demand in this market overall. In fact, it is estimated that the US has more than enough natural gas to supply itself with over 400 years of power. This would also include automobiles if LNG ever takes off in America. If this was ever widely adopted, the economic situation in several Middle Eastern countries would collapse, so it isn't without a bit of concern that all of this gas has come about that analysts regard things.
The gap fell down towards the $2.50 level, and this area could provide a bit of a bounce, just because of the large number value of the figure. However, there is nothing that suggests that the bearishness of this market is unfounded at this point. Because of this, we feel lower prices are in the forecast for this market.
A bounce could, and quite frankly should, be coming in the near term. Because of this, we are looking to sell rallies as the move down has been a bit over exaggerated. While the trend is certainly down, even in markets like these you will see relief rallies, and this is exactly when we want to get back in.
You can only sell this market presently, no matter how imminent the bounce could be. After all, there are new finds of natural gas almost weekly it seems, and the fact that America is running out of storage doesn't bode well for the market either. Quite frankly, there are few things that we would rather own less than this market. All rallies are to be sold going forward.
Natural Gas Forecast January 17, 2012, Technical Analysis