The natural gas market is currently in a deep downside correction following 9 days of sharply higher prices.
This correction comes after a rally which lifted the spot contract price by .997 or 28% over the past two weeks by an early arrival of the winter heating season.
After rallying up to a new 4-month high of 4.544 in early trade on Monday, the December 14 contract ended the day lower by .141 or 3.2% as traders booked profits on recent gains.
The latest 6-10 and 8-14 day National Weather Service forecasts released yesterday afternoon suggested a lesser degree of winter heating demand toward the end of November than previous forecasts. The reaction was immediate as yesterday's late day weakness has continued in overnight trade.
How low this correction takes the market is unknown, but the correction could be fairly deep (50-65%) after the latest launch higher in the market.
Hedge funds which missed the opening stages of the rally may be more interested in buying weakness during November than they were in October when the market was sinking to new lows for the year. Similarly, end users that need to add forward coverage will also be "buying the dip" which will be another supportive factor for the market.
The next market moving event should be the weekly storage report released Thursday morning at 9:30 am central.
Recent price action is a sign of things to come as the market trends higher into early-2015.
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