Enjoy better quality charts below!!
Summary:
CFTC regulations
Exchange-traded funds have drawn increase scrutiny from the CFTC amid concern that the funds are distorting commodity prices.
Aug. 21 (Bloomberg) -- Barclays Bank PLC today stopped selling new shares of its iPath natural gas exchange-traded notes, the latest of $10 billion worth of exchange-traded products squeezed by potential limits on commodity speculation.
The suspension of the iPath notes and U.S. Natural Gas Fund shares means investors will pay premiums to invest in natural gas just as the fuel has fallen below $3 per million British thermal units for the first time in seven years.
This is good for people who currently own UNG, HNU.TO and other NG ETF`s. We are getting a premium for free. I do not see why Bloomberg is analyzing this as bad news.. I love it. If natural gas falls 5% and your UNG only falls 1%, how is that bad?
UNG’s premium over the value of its assets rose to 14 percent above the value of its underlying contracts. The fund fell 16 cents, or 1.39 percent, to $11.35. Natural gas fell 14 cents, or 4.8 percent, to settle at $2.804 per million British thermal units on the New York Mercantile Exchange today.
“Natural gas is now impossible for investors to get a clean position in,” Kay said. Many retail investors may not understand how the premiums affect their returns, he said.
“What it could mean to commodity ETFs down the line is still up in the air,” said Tom Lydon, president and chief executive officer of Global Trends Investments and editor of ETF Trends, in an e-mail today. “It’s too soon to say if any are going to just close because of this.”
Other funds may follow the U.S. Natural Gas Fund into off- exchange swaps that are not yet limited by the CFTC, Lydon said. In the future, investors may have to accept occasional premiums as ETFs and ETNs reach caps on one market and look for another.
Oversupply Issues
U.S. storage depots have been bloated for months with large amounts of unused natural gas because major industrial customers have cut back severely on energy use during the recession.
‘‘It’s going to be consumption that’s going to cause things to turn around...How far they go up is going to be a function of how much consumption there is,’’ said Soucy.
‘‘And so for that you’re going to have to look at what the weather’s going to be like this winter, how quickly is the economy going to pick up so that we see more industrial commercial use for the gas that’s fallen off since the recession.’’
Many Canadian natural gas producers have hedged their gas sales, entering contracts that give them higher future prices than the current spot price. But low spot prices persuade companies to cut drilling for new supplies and dampen the industry’s outlook.
Closing Price:
CALGARY — The price of natural gas fell to its lowest level in more than seven years yesterday, continuing a trend that dealt blow after blow to Canada’s energy sector.
However, it’s too early to tell whether the lower prices will stay long enough to reduce home heating bills for consumers this winter.
The September contract for natural gas dropped 17 cents to just under US$2.95 per 1,000 cubic feet on the New York Mercantile Exchange, a drop of 5.5%.
It’s the lowest level since August, 2002.
Hurricanes:
The 2009 hurricane season, which runs from June 1 to Nov. 30, got off to a quiet start before three named storms formed in a period of 48 hours Aug. 15 and 16. Tropical storms Ana and Claudette have since dissipated. Hurricane Bill is forecast today to pass through open seas between the U.S. East Coast and Bermuda as it moves toward the Canadian Maritimes. A tropical storm warning was issued for the southern Massachusetts coast
Some refineries in Nova Scotia and New Brunswick may be at risk, including closely held Irving Oil’s Saint John plant that processes about 300,000 barrels of oil a day, according to Olivier Jakob, an analyst with research group Petromatrix GmbH in Zug, Switzerland.
Charts:
First I will introduce charts from 1994-2002. Then I will introduce charts after 2002.
To summarize the charts from 1994-2002, it shows basically it is possible to oscillate around the $2-$3 for a couple of weeks..
When I have another 10-20 hours on my hand, I will do a cycle analysis, using statistical models.. that will have to wait.
1994 charts
1995-1998 charts
1998-2000 charts
2000-2002 charts
We are at 7-year lows. I had to go back 7 years to see some significant resistance/support lines
I will now present to you a lot of charts..
Bearish Case:
The short-term charts are indeed bearish.. The downside targets for this triangle breakdown is 2.45 (pessimistic) and 2.75 (optimistic). The bears can push natural gas lower, especially with all these unknown factors with the CFTC..etc.. .
Bearish Chart 1 (240min)
Neutral Charts
Bearish: I feel this chart is also bearish, because it does not look like the candlesticks are making a big reversal BOTTOMING pattern... I expect more downside from this chart.
Bullish Case
This chart below, shows 11 different times where we`ve hit the bottom black trendline. On august 21st we finnaly hit it again after many months. If it holds for good, natural gas will go to 10$ in the next 2 years. If we can break the $3.20 level.. bulls can have this.
Bullish Case 2:
Look at the december futures.. It is not making new lows, making me believe we will quickly reverse from the sub $3. The october futures are higher than $3...
BOTTOM LINE:
These support levels below could be broken quickly.. I`m not sure how low natural gas will go.. But remember, buy when people are scared.. people do not look that scared yet. At 2.45, people will be looking really really scared.
Support: 2.75 (2002)
Support: 2.64 (2002)
Support: 2.45 (2002)
Natural Gas has been in a downtrend for approximately 52 weeks. I believe natural gas is bottoming, however we could hit $2.45 before hitting $4.00, suggesting more downside in the days to come. We are at long-term support levels at $2.70. If that does not hold next week, watch out below for $2.45.
I am long, but from looking at the charts.. I might just sell.. I still have not decided.. Hurricane Season could be a catalyst to bump up natural gas prices temporarily.. . Natural Gas has been in the news everywhere with CFTC regulations and no bottoming signs in sight..
Remeber, natural Gas is not going to zero.
Also buy when people are scared.. How do we decide when people are scared? I do not know. Maybe we shuold have a Natural Gas VIX...
Good luck.
