Wed’s break below last Mon afternoon’s 1.874 initial counter-trend low in the now-prompt May contract reinforces our bearish count introduced in Wed’s Technical Blog and leaves Wed’s 1.973 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter this market needs to recoup to arrest the decline from 18-Mar’s 2.032 high. A recovery above 1.973 is required to render the sell-off attempt from 18-Mar’s 2.032 high a 3-wave and thus corrective affair that would mitigate our broader bearish count and resurrect a base/reversal count from 07-Mar’s 1.731 low ahead of an eventual push to new highs above 2.032. In lieu of such 1.973+ strength we anticipate further and possibly accelerated losses to eventual new lows below 1.731.
The daily chart of the now-prompt May contract above shows that the early-to-mid-Mar’s recovery attempt fell just shy of a Fibonacci minimum 38.2% retrace of Jan-Mar’s 2.549 – 1.731-portion of the bear and former 2.08-to-2.11-range support from Dec-Feb that is now considered a new resistance candidate. Against the backdrop of the secular bear trend shown in the weekly log active-continuation chart below, we believe this recovery attempt should first be approached as another corrective/consolidative event ahead of a resumption of the bear. And while the market’s remaining downside potential per this count is indeterminable, the risk associated with such a resumed bearish count is specific and objective at 1.973 and 2.032.
The monthly log scale active-continuation chart below shows the massive nature of the 10-YEAR secular bear trend in nat gas prices where its continuance should hardly come as a surprise. Given understandably historically bearish sentiment levels however as well as the market’s encroachment on a $1-handle that supported the market for a decade back in the 1990s, traders remain warned of an increased potential for bullish spasms that could well be extensive and contribute to a base/reversal PROCESS that could span years ahead of the inevitable end to this secular bear. Herein lies the importance of identifying specific and objective risk parameters like 1.973 and 2.032.
In sum, a bearish policy remains advised with strength above 1.973 threatening our bearish count sufficiently to warrant a move to the sidelines by shorter-term traders with tighter risk profiles and for even longer-term players to pare bearish exposure to a more conservative level. Subsequent strength above 2.032 is required to negate this bearish count altogether and warrant a move to a neutral-to-cautiously-bullish policy by all traders. In lieu of such strength further and possibly accelerated losses are expected.