(MENAFN- Daily Forex)

• The natural gas market gapped higher at the open on Tuesday and then turned around to serve falling.
• However, we have seen a little bit of a rally later in the day, so it suggests that perhaps we have a little bit of a recovery just waiting to happen.
• Ultimately, this is a market that I think goes looking to the $2.80 level if we can in fact find a bit of bullish pressure.

Major Factors Working Against Natural Gas

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There are a lot of different things working against natural gas at the moment, not the least of course will be the fact that this time of year is very bearish for natural gas, as demand for heating will be almost nonexistent. Furthermore, the United States is fairly mild at the moment, and there are no heat waves that we have to worry about. When the heat waves it, it drives up the demand for electricity, which of course is produced by burning natural gas in large parts of the country.

If we do fall from here, I think the target will be the $2.50 level, but it will probably take a certain amount of time to get there. In the short term, I would anticipate that the short term rally will make a lot of sense, but I will be looking to fade rallies at the first signs of exhaustion. What I would like to see is a long wick to the upside that gets sold off, and then I will not hesitate to short natural gas in that environment, as we have been in such a bearish market to begin with.

At this point, I think the absolute ceiling in the market is the $3.00 level, and it would take a lot to break above there. I do think we will get above there eventually, but that's when we are starting to price in winter, something that we will be doing in a couple of months. As things stand right now, I still remain extraordinarily bearish on this market.

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