The natural gas market began last week’s trade sharply lower with the January 15 contract falling 5.4% in Monday’s session bottoming out at a 3.585 contract low.
The weakness didn’t last as by Friday’s close the January contract has traded back where is began the week settling at 3.795, down just 7 ticks.
Friday’s settle also can above the 10 day moving average which could be further confirmation a market low has been set.
Last week’s 3.585 low was technically important as it held above the previous spot contract low of 3.541 posted in late-October. The inability to drop the market to a new spot low was a warning sign the downtrend may be ending.
With 10 day moving average resistance broken, the near term trend is now up with the 10 day average becoming primary support today at 3.740. A close back under the 10 day average would turn the momentum back to the downside.
The overnight 3.936 high is the first area of resistance followed by 4.045-4.050. The second area of resistance is former daily low support as well as the 40 day moving average. A breakout above this resistance level would very bullish for the market.
Friday’s Commitment of Trader’s report showed heavy fund liquidation for a second week. The funds are currently long 134,679 contracts (futures only), down 17,073 from the previous week. The fund long position is at the lowest level since January 2014 when the winter rally was just beginning. A contrarian bullish indicator?
Technical Indicators: Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Following Index - Bearish
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