- The natural gas market was all over the place during the trading session on Friday as we had dipped below the $3.50 level, but now it looks like we are trying to do everything we can to perhaps hold this previous trend line.
- This is a very important level for me, so I'll be watching this very closely, but I also recognize that this is a market that has been dealing with a lot of different things at the same time.
So for example, we have the cooler temperatures as of late that have supported the market. But longer term speaking, this is typically a time of year where traders start to look at warmer temperatures in the United States and a lack of demand being an issue. If that ends up being the case, then obviously the demand for natural gas will drive the price lower. There's also the potential for a bit of a recession coming. And if that's going to be the case, then you have to assume that there will be a lack of demand as far as electricity is concerned.
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We are sitting just above the crucial 200-day EMA though, and that of course is something that we need to watch very closely because it is a favored indicator of traders around the world. If we break down below the 200-day EMA, it opens up the cyclical selling season, perhaps sending natural gas down to $3. On the other hand, if we do rally from here, keep an eye on that 50-day EMA above, it is going to be interesting near the $3.90 level. I think we are going to see a lot of compression and volatility in this area and then an explosive move. We'll have to wait to see which direction that is, but historically speaking, it makes more sense for natural gas to go down than up right now.
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