June 4 2024 Market Update

Interesting day in Natural Gas.

NYMEX July contract started the day at 745am by making a high of $2.829 US/mm.  Everything was looking good for the longs, but it started selling off and broke down to $2.60 at 145pm.  Currently at 4pm we are trading at $2.60. 

Today was what market technicians would call a Bearish Outside Day.  First, today broke above yesterday’s high and then it broke down to a low that was below yesterday’s low.  The concept is that if the market cannot hold a new high and it sells to a new local low, then sellers are in charge.

Do I believe this chart pattern is some magical crystal ball?  No… but I do think that the trend followers who jumped on the Natural Gas rally last month believe in this crystal ball. Chart from TradingView

The next level would be Friday’s low of $2.518.  However, I would expect tomorrow to be a consolidation day where we don’t do much and everyone starts thinking about the storage number on Thursday.  So I would be surprised if this big sell off continued again tomorrow.

Last month felt like being on the express elevator going up and today felt like the elevator was going down.  But if last month represented the first leg of a new bull market in natural gas, then a retracement and consolidation like we had today would be normal.  If last month was a short squeeze, then we should see each level consecutively broken on its way down.   If that sell off happens, the pundits will talk about bearish fundamentals like storage.

More important than all that is that winter 24-25, summer 25 and winter 25-26 are all inside their respective ranges.  Those charts show a market that is going to go sideways until something changes (and it always does).

The pundits are focused on cooler weather in the forecast as the reason for today’s price action. [WFG]

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