The natural gas markets fell again on Monday as the trend downward continued. The market has fallen precipitously over the last several months, and there is absolutely no end to this downward spiral in sight. The $3.50 level has put up a nice fight, but the close on Monday suggests that the level is about to give way at this point. The breaking lower of the Monday lows would send this market down and looking for the $3 level eventually.
The buying of this market is almost impossible as catching a falling knife is one of the worst things a trader can attempt. This is the epitome of a strong bear market, and because of this we cannot step in front of it at this point. In fact, the $4 level needs to be broken to the upside in order for us to consider buying this massively downbeat commodity.
The supply in natural gas is far outstripping the demand, and should continue to do so for the foreseeable future. The US has over 14 Trillion Cubic Feet of proven reserves in this commodity, and as a result it will take something extraordinary to drive this market up over the long-term. Because of this fact, we are long-term sellers of natural gas, and would never seriously consider a long-term buy even if we get over the above mentioned $4 mark.
The short-term looks like a sell at $3.43, and at that point we are looking for a dime in profits. The next leg down will be much like the previous one: down, strong, but choppy. The move won’t be sudden as the winter in the US does bring more demand, and traditionally the market likes to rise during this time. (It won’t this year; rather it will keep it from falling too quickly.) Natural gas is a “sell only” market at all times. We are either short of it or flat of it…nothing else at this point in time, and will not be changing that for the foreseeable future as the supply is getting so expanded, that the natural gas suppliers are running out of places to store it.