Natural gas markets initially gapped higher at the open on Monday but then ran into resistance at the top of the massive triangle that we find ourselves in. This is a market that is clearly trying to find direction after a huge move to the upside, and I feel that it is probably only a matter of time before we get said move. As we roll into the end of the year, we start to think about springtime, which of course is a very negative time for natural gas as temperatures rise in the United States.
Rallies at this point in time look suspicious to me, and I believe that the $5.00 level above is massive resistance, so if we did break above there it would be a huge boon to the bullish attitude of natural gas markets. However, there is so much in the way of supply out there that producers will be more than willing to sell this market at higher figures. Clearly, as the downtrend shows on this triangle, it’s very likely that sellers will continue to come back every time they get a chance. The $4.00 level underneath will be supported, and if we can break down below there I think it will open up a vacuum to the downside. Overall, consolidation does give us an opportunity to start trading for a larger move, waiting for some type of momentum to push us in a direction. Ultimately, I do favor the downside though and look for gaps underneath to be filled.