• Models continue to see further downside in the June 2025 futures for the near-term.

• Models identify today’s price action as a short-covering rally. Short-covering rally could have additional upside until Wednesday and there is an above-average probability that such a rally could be violent.

• Market went through buy stops located between 3.15 and 3.2 level in June futures today amongst speculators who were short, fueling the upside rally.

• Market tried to break lower following highly bearish EIA storage number on Thursday 4/24 - but repeatedly failed, suggesting that short-covering rally could be violent over the next two days.

• We still do not recommend initiating any long positions in this market until long liquidation has been exhausted amongst systematic traders. Long liquidation is decelerating, but still occurring. New shorts entered the market following the bearish EIA storage report.

Our models continue to see further downside in June 25 Natural Gas futures in the near-term. The market had a strong rally today, a move which our models have identified as a short-covering rally.

The market could have a violent upside move over the next two days, as a strong short-covering rally typically lasts between one to five days. Shorts entered the market immediately following the bearish EIA storage number on Thursday and are now exiting their positions.

For those of you who want to get short (you’re still in the minority!) - we recommend waiting for the next two days as there could be a violent short-covering rally ahead. We do not recommend initiating a long position as of yet due to the underlying trend of long liquidation which has occurred over the past several weeks.

We see a lot of stops concentrated between 2.9 and 3.0 in the June 25 futures - should the market break this level, the probability of an accelerated move to the downside increases significantly. If the market has truly reached a short-term bottom and long liquidation has been exhausted, we expect a strong bullish reaction immediately after this level has been tested.

On the upside, we see stops at the 3.50 level, and 3.75 level.

Today, the market accelerated higher immediately after going through stops at the 3.15 / 3.20 level. Price action was very strong, and very typical of a short-covering rally as (a) offers were lifted very aggressively; (b) intraday-declines were negligible; (c) strong volume accompanied the market piercing the 3.15 - 3.20 level.

From a statistical perspective, volumes are higher in a short-covering rally in comparison to a rally sparked by speculators initiating long positions, as speculators who are short are frantically seeking to cover their short position at a loss in such a rally. In contrast, speculators seeking to initiate a long position will generally not chase the market higher in an uncontrollable fashion - rather, they will seek to buy every dip in a methodical, algorithmic fashion.

The market witnessed a highly bearish number on Thursday 4/24 - the consensus storage number was 69, and the actual number came out at a whopping 88, marking a difference greater than three standard deviations. Needless to say, it is rare for the difference between actual and consensus to be this large, and gives us a clear indication of where positioning is at the moment, as the market failed to sustain a break lower.

In addition, immediately following the number at 1030 am on Thursday, our models saw a combination of long liquidation and new shorts entering the market. The same shorts that entered this market following the number are now likely exiting their positions at a loss, a trend which may continue for the next two days. Furthermore, it is noteworthy that the market attempted to break lower on Friday morning following the bearish number, but failed - this is yet another sign that in the near-term buying pressure has exceeded selling pressure due to new shorts entering the market.

We will post an update in the next few days with a revised outlook .