- The natural gas markets fell a bit during the course of the early hours on Monday, testing the $2.25 level.
- The natural gas market is one that I get a lot of interest from, and in my daily analysis of the natural gas markets, it’s hard not to notice that the market is definitely looking for some type of support.
That being said, this is a market that I am very cautious with, and I generally tell retail traders that they have to be very cautious about trading. Unfortunately, I get emails throughout the year from retail traders that have gone into the natural gas markets with a massive amount of leverage, and now desperately hoping for some type of miracle to turn the market around. Quite frankly, the natural gas markets move on fundamentals more than most other assets, as you have a situation where traders will begin to worry about hurricanes in the Gulf of Mexico, weather patterns in the northeastern part of the United States, and of course the amount of transmission that is currently going through the US natural gas pipelines.
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It’s an American Market
One thing that a lot of traders forget is that most natural gas CFD markets are based on the Henry Hub Contract, which is a measurement of price in Henry, Louisiana. In other words, it’s a very US centric market and a lot of people will naturally try to equate what’s going on in Europe with what’s going on in Louisiana, which of course is nonsense.
It can be influential when euro is hurting for supply, mainly due to the fact that the US will then export natural gas to the European Union, but that is somewhat limited in the sense that most US natural gas is already spoken for as far as exports are concerned, and that generally means Asia. In other words, you need to be cognizant and up to the task when it comes to US demand more than anything else.
That being said, we are in an area that could very well provide a bit of an uplift, as the 61.8% Fibonacci retracement level is here, and of course the $2.25 level will attract a lot of attention. That being said, we also have the 50-Day EMA breaking below the 200-Day EMA, kicking off the “so-called death cross.” Unfortunately for this indicator, it’s typically late, so I only read so much into it. If you are a longer-term trader, this is a potential investment, but the key word here of course is going to be investment.
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