The prompt month September natural gas contract has bounced almost perfectly off its 100-Day Moving Average (DMA) today, as seen below. 

After six straight down days, this is not much of a surprise, as prices were overdue for at least some type of a bounce. Heading into the close for the weekend, it appears very likely that we will see a bullish engulfing candle, meaning further upside could be possible early next week. We see resistance overhead around $2.65/$2.66 at the 60-DMA, with more significant resistance around $2.72. To break through that, we would likely need some type of upward catalyst, though thus far one does not seem apparent. Instead, we have actually seen the back of the natural gas strip lag, with the most significant gains today right at the front of the strip (as of 2:15 PM). 

The result has been a bounce in which the winter strip has not participated as much, rising just a couple cents in what has been a stronger rally for the prompt month contract. 

In fact, the V/F spread has barely made it above the level we closed Wednesday, despite the prompt month contract being a few cents above that level. This indicates how isolated the rally in the front month September contract is, and that it likely is not production/supply-based, as later strips in the contract do not seem nearly as excited. 

In the short-term there does remain some hope for the bulls. Population Weighted Cooling Degree Days are forecast by the National Weather Service to be 31% above average through the next 7 days, as seen below. 

This should help keep powerburns elevated, at least in the short-term. Additionally, a bounce off the 100-DMA resulting in a bullish engulfing candle for the prompt month contract could bring in technical buyers to start the next week as well, especially if few new bearish catalysts arise over the weekend. 

Still, eyes will be on the weather to see when heat may abate. Cooler forecasts through the week have depressed prices, as we warned clients in our Detailed Weekly Update on Monday may occur, though most of the longer-term cool risk did not become apparent until Tuesday and Wednesday. 

As a comparison, the Climate Prediction Center 8-14 Day outlook issued Sunday evening looked like this (courtesy of NOAA/CPC). 

Meanwhile, the one issued last afternoon looked like this. 

Their next update will come between 3 and 4 PM today and will be provided as part of our Pre-Close Update, where we analyze the latest weather models and advise clients how the natural gas market may move over the weekend. Clearly, though, weather shifts played some role in this recent sell-off in prices, so moving into the next week traders will have one eye on the latest models while also watching those key technical levels. It may be up to the weather whether today's bounce has legs.