Recent volatility has been near record high for the beginning of winter as the chart to the left shows.
A rally which began on October 28th at a 3.620 contract low topped out 10 days later at a 4.544 high, a gain of over 25%. The rally was followed by a downside correction last week which erased over 60% of the previous market gains. But in just three days of trade this week, the market is once again approaching "breakout" resistance.
This resistance shown via the red horizontal line is previous daily lows from last May which are now acting as resistance over the past two weeks. The market has pushed above this resistance level intraday but has yet to post a daily close above 4.450-4.500. If this resistance is broken, the 4.985-5.000 highs set in early-2014 will become the next longer term price objective.
Tomorrow's weekly storage report could be the factor to rally the market higher. Or it could have the opposite effect if it comes in with a small injection rather than a 10-15 Bcf withdrawal many analysts are predicting.
Natural gas is currently in a weather driven market which is typically volatile and extremely choppy as the last three weeks have shown. Winter has started out on the cold side and could be a sign of things to come.
If the current rally fails, the market could quickly set back toward the lower-4.000 level and possibly under. But longer term, weakness should be well supported as the winter 14-15 natural gas rally progresses.
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