It achieved slight daily gains until the moment of writing this report, by 2.53% to settle at the price of $7.664 per million. This is after declining sharply in last week’s trading, by -6.07%.

Natural gas prices fell last Thursday after three consecutive days of gains, with June futures in Nymex dropping 45.1 cents to $6.888 per million British thermal units, and July futures dropping 44.2 cents to 6.994 dollar.

NGI’s Spot Gas National Avg, which traded Thursday for gas delivery on Friday and Saturday despite the continuation of unstable weather in the eastern US, was down 50.0 cents to $6,570.

The US Energy Information Administration (EIA) said that US natural gas inventories rose by about 40 billion cubic feet in the week ending April 22, and economists polled by the Wall Street Journal had expected a rise of 38 billion cubic feet.

Production in the US has shown some signs of recovery, but during the ongoing maintenance season production may fluctuate over the next couple of months, Canadian imports were lower with Mexican exports rising slightly.

On the technical analysis side, we are expected to see a decline in the price to reap the profits of its recent rises and try to gain some positive momentum that may help it recover and rise again. This is in light of the dominance of the main bullish trend in the medium term along a slope line, as shown in the attached chart for a period (daily). This is in addition to the continuation of the positive support for its trading above its simple moving average for the previous 50 days.

The US dollar has fallen against the Japanese yen during the trading session on Wednesday, as the overbought conditions have finally started to acknowledge the existence of gravity. 

The massive amount of buying pressure that we had seen has gotten overdone, and therefore a pullback would be expected. Because of this, I do believe that we have further to go to the downside, perhaps a move down to the ¥120 level.

Having said that, it is not necessarily mean that I am willing to short this market, rather I am waiting to see whether or not we get any type of support underneath after a pullback. After all, the markets will continue to be driven by interest rate differentials, which have exploded recently, due to the 10-year note being sold off so aggressively. As that has been the case, it the very likely that the market will continue to follow the 10-year note on an inverted chart.

A breakdown below the bottom of the candlestick for the trading session on Wednesday will open up a move down to the ¥120 level, possibly even as low as the ¥118 level. The 50 Day EMA is racing towards that area, and therefore it looks as if the market will likely see value hunters in that area. Keep an eye on the longer-term chart, as the ¥125 level is a major resistance barrier on the monthly charts. With that in mind, you should understand that breaking above that level would be a major breakout and could send this market much higher over the longer term.

The market has been so parabolic that this pullback is necessary. The market continues to be very noisy, so you need to be cautious with your position size, but I do not like the idea of buying it all the way appear. I will be paying attention to the weekly chart, perhaps for a signal to short, or perhaps for a signal to turn around and start buying again. At this point, I think that caution is the better part of valor and should be respected as such. Ultimately, this is a market that needs to be approached with caution, as once we get overdone like this, the volatility gets to be very dangerous and can ruin accounts.