Natural gas markets have collapsed during trading on Tuesday as we have broken significantly below the crucial $4.75 level. At this point, I believe that the trend for the winter is over, and we are now in a “sell the rallies” type of phase. Most of this is based upon warmer than anticipated and usual temperatures in the United States, something that is expected to last for a while. Because of this, I have no interest in trying to buy this market anymore, especially now that we have broken through what is such obvious support.
NATGAS Video 01.12.21
Natural gas markets should be weak in general, because quite frankly the United States is absolutely swimming in natural gas. For years, you could not give it away, because it was so abundant. That is the natural state of things, and now that people have stopped pricing in Europe’s problems in an American contract, we may see a return to normalcy. Keep in mind that we are trading the January contract, so with warmer than usual temperatures in January, that will have a direct effect on what goes on here.
Ultimately, I do think that this is a market that has much further to go to the downside, but we will obviously get the occasional rip higher. The natural gas markets will be paying attention to the fact that spring is coming, and obviously demand will drop as a result. The natural gas markets are volatile under the best circumstances, so I do not anticipate this to be an easy trade regardless. With that in mind, keep your position size reasonable and recognize that we could have quite a ride over the next couple of weeks.
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