Natural gas continues to see a lot of noisy chop, but at this time, we are still essentially “stuck.”
Natural Gas
Natural gas markets fell right off the bat on Tuesday but did bounce a bit near the $3.15 level. This is an area that has been supported over the last several days, and it also suggests that the market is going to continue to hang around the same area. That makes a certain amount of sense, considering that the time of year is typically very poor for natural gas as demand drops significantly.
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The natural gas market that 99% of you are trading is the US natural gas market, so although there are thoughts that perhaps the Europeans will have to import more American liquefied natural gas, the reality is that there is so much natural gas in storage in the United States that we cannot really get any momentum to the upside. Currently, the heat index in the northeastern part of the United States and beyond is roughly 40° Celsius, and while that does drive up demand for air conditioning, it should roll over here in 3 or 4 days and therefore the supply withdrawal is going to be somewhat limited.
Summer Heatwaves and Core Range Bound Levels
When I look at this chart, it is very easy to see that the $3.00 level underneath is significant support while the $3.50 level above is significant resistance. I think you have a situation here where traders are going to continue to look at this as a market that will be choppy and sideways, but ultimately, you only have 2 viable choices right now from what I can see.
One of which, of course, would be to buy at the bottom of this small range and short at the top, going back and forth on low-timeframe charts. The other option, of course, is to wait for some type of spike this summer and fade that spike if we really start to break out. After all, it is only a matter of time before a heatwave turns over, which is exactly what we are seeing now. The fact that we really did not even move based on the hot weather forecast tells you that this is a market that is simply grinding.
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