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Natural Gas Prices Rally: What the... Frack?

Thu, 17 May 2012 05:00:00
by Nico Isaac

(Editor's Note: Natural Gas prices have gone on to rally as much as 35% since the April low. Posted May 17)

What is the universal badge of any truly consistent financial analyst?

Skill?
Experience?
Technique?

No. It's discipline, the ability to stand beside your interpretation of a market's trend even as the opposing, gale-force winds blow against you.

Let's take the recent performance in natural gas, for example. Back in mid-April, natural gas prices were circling the drain pipe of a 10-year low. And, according to the mainstream experts, the market's upside was pinned under one giant bear claw thanks to hydraulic fracturing, or "fracking."

Here, the following string of April 19 news items capture the bearish mainstream expectations for natural gas's near future:

Natural Gas ETF UNG is named "One of the 5 Worst ETF Investments Ever." (Market Watch)
"Unrelenting Bear Market Continues For Natural Gas" (Associated Press)
"At this point there isn't anything new to say about natural gas. Most of the investing world has lost hope that it will recover anytime soon... The overarching theme of the market is still bearish." (Reuters)

But, right around the same time, according to EWI's Energy Specialty Service, there was indeed "something new" to say about natural gas: Namely, it was time to turn bullish.

On April 20, Energy Specialty Service's intraday analysis of both Natural Gas futures and UNG set the stage for a meaningful rally via these timely insights:

For natural gas futures, Energy Specialty Service wrote on April 20:

"The key point is that the evidence (i.e. oversold technical measures, waning momentum, and extreme bearish sentiment) suggest that the market is ripe for an upward reversal. The market should be in the latter stages of the decline.

"...the divergence between price (declining) and momentum (waning) point to... an eventual upward turn in what should be a healthy advance despite the oppressive (and well publicized) fundamental backdrop."

For UNG, Energy Specialty Service's editor Steven Craig wrote this on April 20:

"No bottom yet but I continue to suspect that it's close at hand. The market is oversold and ripe for a reversal."

Since then, both natural gas futures and UNG have rallied 27%.

This is the big league of energy markets. Natural gas futures -- and UNG has an average daily trading volume of 8.5-10 MILLION. And, that's just the tip of what EWI's Energy Specialty Service covers.

This premier energy trader-focused resource brings you intraday and daily updates for:

NYMEX crude oil
Brent crude oil
Heating oil
Unleaded gas
Natural gas

PLUS: You get daily forecasts for energy ETFs UNG, XLE and USO.

Don't miss another beat. Get the complete, inside story today with your very own, personalized Energy Specialty Service package.

(Editor's Note: Natural Gas prices have gone on to rally as much as 35% since the April low. Posted May 17)

Natural Gas and UNG: An Opportunity in the Making?

Energy Specialty Service: Comprehensive intraday and daily forecasts for the active trader

You get timely and actionable forecasts for crude oil, natural gas -- as well as USO, UNG and XLE -- and other global energy markets in EWI's specialized energy forecasting service.

Discover what real-time updates and expert Elliott wave analysis can do for your trading >>

Crude Oil's Longest Losing Streak in 2 Years. Will it Last?

Thu, 10 May 2012 18:00:00
by Nico Isaac

One of the biggest flaws of mainstream financial analysis is that it baits traders with a specific fundamental "hook." And once snared, they are forced to go wherever the reel draws them in, powerless to resist.

If prices should go the other way (as they often do) the trader is caught while the experts get off scot-free with choice phrasing like "prices fall DESPITE bullish supply data," OR "prices BRUSH OFF bearish jobs report."

The Wave Principle, on the other hand, is founded on a number of key rules and guidelines that enable you to adjust your Elliott wave counts as price action sees fit. With this solid framework in place, Elliott wave analysts approach a market able to determine these (and more) criteria:

Fibonacci-calculated price support and resistance levels on a chart
The likely length of developing waves in relation to other waves
And, whether the trend at hand is impulsive or corrective-- as in, here to stay or not.

Let's turn to a real-world example with the recent price action in crude oil. See, on May 2, both the mainstream experts AND EWI's Energy Specialty Service were near-term bullish on crude oil. Herein, however, lies the difference:

The fundamental camp presents its case with this May 2 news story: "Crude oil futures start May by bouncing to a five-week high as US manufacturing growth in April hit the highest in 10 months, boosting the demand outlook for oil."

In this case, there is no wiggle room to prepare for an alternate (i.e. bearish) outcome. This would be fine IF market analysis was about 100% certainties. But, as Elliott analysts know, it's about probabilities.

That same day, May 2, EWI's Energy Specialty Service revealed how its "preferred" bullish Elliott wave count for crude oil hinged on this crucial action: "Crude needs to continue higher to support the idea that the next leg of the advance is underway. At this point, trade below 101.82 won't bode well for the idea that the decline from the early March peak is done… and an even longer decline would seem likely."

On May 3, crude oil prices broke the 101.82 price level. The May 3 Energy Specialty Service 1:56 pm intraday update confirmed the bearish event and wrote:

"The market's failure to extend the advance argues for the alternate count… A much deeper decline should lie ahead."

The six-day long losing streak since then speaks for itself. Don't get caught in a fundamental corner. Stay ahead of the near-term changes in crude oil via EWI's trader-focused Energy Specialty Service.

Get Ahead of the Next Big Opportunity in Oil

Energy Specialty Service: Comprehensive intraday and daily coverage for the active trader
Get timely and actionable forecasts for crude oil, nat gas and other global energy markets in EWI's most specialized Energy forecasting service. Discover what real-time updates and expert Elliott wave analysis can do for your trading. DETAILS>>

What's Odorless, Colorless -- and Just Gained 28%?

Thu, 10 May 2012 15:30:00
by Vadim Pokhlebkin

Quick story. Back in 1998-1999, when a gallon of regular at a local QT gas station cost 67 cents (I kid you not), a colleague of mine here at the office was talking to an old buddy, who told him this:

"When a barrel of oil costs less than a 12-pack of beer, you know it's time to buy."

Boy, do I wish I had listened. Crude went from the low of just over $10 a barrel in 1998 to almost $150 in 2008. Of course, then oil promptly fell to just over $30 a barrel -- but that's another story.

Today's story is natural gas. Let's let this picture do the talking:

This is a chart from our Energy Specialty Service (with Elliott wave labels erased). After seeing this huge decline, the "natural" question is: Can natural gas go any lower, or are we seeing a repeat of the 1998 situation in crude?

Keep in mind that natural gas prices have already rallied from their April low of $1.982 to as high as $2.531 -- a gain of 28%.

UNG, a popular natural gas exchange-traded fund (ETF) rose from $14.25 in April to $18.11 now -- a 27% gain.

Is it time to buy? Or are lower lows on the way?

Our Energy Specialty Service brings you forecasts of both natural gas and UNG daily, plus intraday updates for natural gas (as well as crude and Brent).

Natural Gas and UNG: An Opportunity in the Making?

Energy Specialty Service: Comprehensive intraday and daily forecasts for the active trader

You get timely and actionable forecasts for crude oil, natural gas -- as well as USO, UNG and XLE -- and other global energy markets in EWI's specialized energy forecasting service.

Discover what real-time updates and expert Elliott wave analysis can do for your trading >>

Crude Oil Tanks: Is the March Peak a Distant Memory Now?

Thu, 03 May 2012 17:15:00
by Nico Isaac

******

UPDATE May 4, 1:23 p.m. EDT:
Today's dramatic decline in oil of nearly 5% to beneath $98/barrel answers some of the questions posed in this article. Right now, you can find out how this drop fits into the larger Elliott wave picture, and get a jump on Crude's next big move with EWI's trader-focused Energy Specialty Service >>

Or, get the bigger picture outlook for crude oil, as well as global stocks, interest rates, currencies, metals and more in the next issue of EWI's Global Market Perspective (publishes today, May 4).

******

In the last 24 hours, I have seen more back-and-forth, back-and-forth action in the "fundamental" news stories regarding crude oil than on the courts of the Masters Tennis tournament.

But don’t take my word for it. The following slew of news items capture the bobble-headed nature of the fundamental game:

First, bad economic data falls on dead ears: “Oil Holds Steady Despite Negative US Jobs Report.” (Associated Press)
Then, bad economic data raises bearish fears: “Oil Tumbles As Economic Outlook Worsens.” (Reuters)

-- NEXT --

First, rising oil prices are a demand killer: “Demand Growth Compromised By High Oil Prices” (Travel Daily News International)
Then, it’s a space filler: “Air Demand Up Despite High Oil Prices” (The Independent)

-- NEXT --

First, anticipation of surging supply is bullish: “Oil ticks Up Ahead of Supply Report. Investors positioned ahead of inventory data expected to show increasing oil stockpiles.” (Wall Street Journal)
Then, its actuality is bearish: “Oil Prices See Biggest Drop In Two Weeks On Growing Supply.” (Reuters)

With "fundamental" analysis, you never really know when one factor will be holding the strings of a market’s trend one minute, only to be cast aside by that market the next.

Elliott wave analysis cuts through the muck by focusing on the internal force behind every major trend change in a financial market: social mood, which unfolds in objective Elliott wave patterns on price charts.

And, right now, EWI’s Energy Specialty Service is hot on the trail of the near-term trend underway in crude oil. The May 3, 1:56 PM, Energy Specialty Service intraday update for crude presents an Elliott wave-labeled chart of the market since its early March high. (Chart reprinted below minus Elliott wave labels).

The focus of Energy Specialty Service’s analysis is in the market’s recent performance (circled in blue.) The main two questions being:

Has the price action unfolded in 3 waves -- thus signaling a corrective price move that will be fully retraced? Or has it unfolded in 5 waves -- thus signaling an impulsive move that will see much further gains ahead?
And, what are the critical resistance and support price levels prices need to penetrate to bolster one interpretation or the other?

UPDATE May 4, 1:23 p.m. EDT: Today's dramatic decline in oil of nearly 5% to beneath $98/barrel answers some of the questions posed in this article. Right now, you can find out how this drop fits into the larger Elliott wave picture, and get a jump on Crude's next big move with EWI's trader-focused Energy Specialty Service >>

Get Ahead of the Next Big Opportunity in Oil

Learn more about the EWI service that best suits your personal needs:

Global Market Perspective: Tap into intermediate- to long-term opportunties in crude
Each 100-page issue gives you the independent perspective you need to put your finger on the pulse of every major market in the world. You'll get insightful analysis and specific forecasts for crude oil, global stocks, currencies, interest rates, gold, silver and much more. DETAILS>>

The Dollar & Gold Have Eyes on Europe

Sat, 05 May 2012 19:29:19 +0000
by J.W. Jones

Friday saw heavy selling pressure coming into risk assets, specifically equities and oil. However, the real driving force behind the selling pressure is likely the result of several unrelated economic/geopolitical events. Clearly the unemployment report had an impact on price action, but strangely enough it would appear to those more in tune with reality that market participants want lower prices so that the next quantitative easing program can be initiated.

Another key development in equities price action as of late has been selling pressure in Apple (AAPL). A few weeks ago we witnessed a sharp downturn after prices surged higher into a blowoff top. Earnings came out and prices jumped again and we have watched Apple's stock price drop considerably since.

Friday saw sellers circling the wagons pushing the tech behemoth down around 2.25% as of the scribbling of this article. When AAPL was rallying it helped the Nasdaq Composite and the S&P 500 grind higher. Now that it has clearly given up the bullish leadership role, it now appears to be a drag on the price action of domestic indices.

Additionally there was a mountain of economic data released out of Europe overnight which was entirely negative. Spain, Italy, France, Germany, and the Euro-area in general saw their Service PMI readings all come in below expectations. Europe is moving into a recession which whether economists want to acknowledge it or not has implications on domestic U.S. markets. The Eurozone as a whole is the largest economy in the world. Clearly the European economy is slowing, and our exports to Europe will slow as well.

This leads me to the final data point which is still unknown. What will the outcome of the French and Greek elections over the weekend mean for the Eurozone's geopolitical ties as well as the potential impact on the Euro currency itself?

The answer to that question will likely not be known until late Sunday evening; however by the time U.S. markets open this coming Monday the cat(s) will be out of the bag. This final question leads me to the real topic of this article. The question I want to know is what impact these elections could have on the value of the U.S. Dollar Index as well as gold?

As an option trader, I am always focused on the volatility index (VIX) as well as implied volatility on a number of underlying assets. I came across the following chart courtesy of Bloomberg which appeared in an article posted on zerohedge.com. The chart below illustrates the differential between European Union equities' implied volatility levels and the EUR/USD currency pair.

Chart Courtesy of Bloomberg

It is rather obvious that EU stocks and the EUR/USD implied volatility levels have diverged. Generally speaking, when volatility increases it means that price action will typically move lower. The higher levels of volatility, the lower the price the underlying will move. There are exceptions to that rule such as earnings reports or key headlines which drive volatility higher, but generally speaking high volatility levels correlate with uncertainty and risk.

What is particularly troubling about the chart above is that the EUR/USD currency pair is seeing reduced implied volatility. This essentially means that the market is not expecting any major moves in the currency pair amid all of the poor economic numbers coming out of Europe.

For those not familiar, the EUR/USD currency pair reflects the value of the Euro against the Dollar. Thus, if the EUR/USD is rising, this means that the Euro is moving higher against the Dollar. The opposite is true when EUR/USD is selling off.

At present implied volatility levels are quite low by comparison to European equities. The zerohedge.com article entitled “Is EURUSD Volatility About to Explode?” shares the following statement to readers, “The last two times this has occurred (in the last year), EURUSD implied vol has rapidly caught up to equity's risk.”

What that statement means is that it is becoming more likely that implied volatility of the EUR/USD currency pair is going to increase back in par with European stocks. If that takes place, which based on recent data is likely, the intraday volatility in the EUR/USD will increase thus intraday price ranges and sharp moves will become more prevalent.

The long story short is if implied volatility picks up in EUR/USD then it is likely going to be quite beneficial to the U.S. Dollar. The largest concern for Fed Chairman Ben Bernanke has to be the potential for a monstrous move higher in the U.S. Dollar should an unforeseen event arise in Europe. An event such as a disastrous auction or the discussion by German Parliament about leaving the Euro could both help push the Dollar much higher than anyone expects.

A higher Dollar is negative for risk assets and Mr. Bernanke does not like the word deflation at all. None of the central banks around the world like deflation because it means all of the debt they are holding and helping to prop up has a much more significant intrinsic value. If the Dollar is worth more, Dollar denominated debt is also more expensive to pay off.

The U.S. Dollar Index has languished for several weeks, but recently the greenback started to reverse higher and at this time has managed to push above major resistance levels overhead on the daily timeframe. The daily chart of the U.S. Dollar Index is shown below.

If the Dollar remains firm into the bell on Friday which appears likely, the results of the two key European elections over the weekend could provide the ammo needed to really force the U.S. Dollar higher or lower depending on market sentiment. It appears the Dollar wants to go higher currently, but a sharp reversal is not out of the question.

The key level to watch is the 80.76 price level on the U.S. Dollar Index futures. If that level gets taken out, the Dollar could extend to recent highs and beyond should the situation in Europe begin to unravel.

If the Dollar surges what will that mean for gold? Generally speaking most readers would expect gold and silver to move lower on Dollar strength. For a time, that would likely be true, but if a real currency crisis plays out gold and the Dollar might rally together as citizens would try to move their wealth into safe, liquid assets.

Under that type of scenario, gold and silver could both rally along with the Dollar. When the moment finally arrives where the Euro begins to selloff sharply, physical gold and silver will be tough to acquire in Europe.

In the short to intermediate term, gold will likely continue to drift lower searching for a critical bottom. The weekly chart of gold futures below demonstrates the key support and resistance levels that may have to be tested before a major reversal can play out.

Make no mistake, I remain a gold bull in the long term. However, in the short run the Dollar has the potential to outperform gold under the right circumstances. Ultimately it is important to recognize the distinction between selling pressure and what would likely happen in a full blown currency crisis in Europe which is possible, if not ultimately inevitable.

The price action over the weekend on Monday will likely be telling and we could see the beginning of a major move in a variety of underlying assets depending on the election results. Clearly times have changed when U.S. market participants are concerned about what is going on in Europe more so than domestic issues. Unfortunately, we live in very strange times.

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Jw Jones

This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

Oil Prices: It's Quiet, VERY Quiet

Tue, 17 Apr 2012 17:15:00
by Vadim Pokhlebkin

Have you ever thought about this: When do you hear the most bullish opinions about a market – when it’s near a top, or near a bottom?

You don’t have to be a market veteran to know the answer: Near a top. Or at least when prices are rising strongly.

That brings to mind the recent picture in crude oil. When the price of oil topped $110 a barrel in late February-early March, the headlines were all over the rally, suggesting it was going higher:

"In the current market situation, the price per barrel will probably reach $150." (AFP, Feb. 20)
"Oil at 9-month high above $105 a barrel. A weaker greenback can support oil buying..." (MarketWatch, Feb. 20)
"Oil crosses $109 US on rising concerns about Iran. Everyone's pricing in the potential for war now. ...nobody knows how high this can go." (Feb. 24, CBC News)

Since the late February-early March peak, crude oil price has declined steadily, hitting a low of just above $100 days ago. How many news stories bullish on oil do you see today?..

The editor of our intensive Energy Specialty Service, Steven Craig, has been tracking oil's daily and intraday moves closely. A market veteran, Steven has been telling his subscribers about one important message that Elliott wave patterns in crude oil charts have been sending (Elliott wave labels erased for this article):

NYMEX Crude (Intraday)
Posted On: Apr 17 2012 11:43AM ET / Apr 17 2012 3:43PM GMT
Last Price: 104.44

The message is simple: The shape of the price pattern since the February-March top fits well the definition of an Elliott wave correction. If you are familiar with Elliott, you understand what that choppy, overlapping price structure implies for oil prices from here.

If you're new to Elliott, or if you want more details -- along with Steven Craig's price targets and other important information -- see the latest oil price forecasts inside Energy Specialty Service online now.

Want Elliott Wave Insights into Energy You Won't Find Anywhere Else?

Stay ahead of global energy trends with help from EWI's Energy Specialty Service

Editor and 30-year energy market veteran Steven Craig lives and breathes these markets all day, every day. Get his timely, actionable forecasts for crude oil, nat. gas and other global energy markets now.

Let Steven help you find your next big opportunity in oil.

Learn how you can start today with Energy Specialty Service >>

Oil and Stocks: Does One Lead the Other? Examining the Evidence

Thu, 29 Mar 2012 17:15:00
by Vadim Pokhlebkin

The stock market closed lower on March 28, and the headlines were there to explain why: falling oil prices.

"Wall Street slid deeper into the red as traders reacted to sinking oil prices and weaker-than-expected data on the US manufacturing sector." (Fox Business, March 28)

The notion that oil and stock prices are linked is everywhere. Usually it's a negative link, as in oil falls, stocks rise. But as we see above, sometimes the "explanation" claims falling oil is "bearish" for stocks.

The truth is simple: the link between stocks and oil does not exist.

Here's part of the evidence Robert Prechter presented in his March 2010 Elliott Wave Theorist:

It would take weeks to collect all the statements that economists have made to the press to the effect that recently rising oil prices are “a concern”... For many economists, the underlying assumption about causality in such statements stems from the experience of 1973-1974, when stock prices went down as oil prices went up. Figure 7 shows, however, that for the past 15 years there has been no consistent relationship between the trends of oil prices and stock prices. Sometimes it is positive, and sometimes it is negative.

In fact, during this period it has been positive for more time than it has been negative! And the quarters during this period when the economy contracted the most occurred during and after the oil price collapse of 2008. Thereafter oil prices doubled as the economy was reviving in 2009. This graph negates all the comments from economists who say that an “oil shock” would hurt the stock market and the economy. It also throws into doubt the very idea that stock prices and oil prices are linked.

So, if you cannot predict what stocks will do by looking at oil -- or vice versa -- then how can you forecast those two markets?

Elliott wave analysis can help. Our own Energy Specialty Service, for example, brings subscribers a nightly forecast plus the intraday updates as crude oil trades. Here is one of the March 29 intraday charts (some Elliott wave labels have been erased for this article):

NYMEX Crude (Intraday)

Posted On: Mar 29 2012 1:54PM ET / Mar 29 2012 5:54PM GMT

Last Price: 102.35

As you can see, oil prices have been moving sideways in a choppy, overlapping manner. That's the very definition of an Elliott wave correction -- what you see labeled (w)(x)(y) in the chart above.

The next move in oil is likely to be explosive. Our Energy Specialty Service tells you right now in which direction, and how far, prices are likely to go.

Want Elliott Wave Insights into Energy You Won't Find Anywhere Else?

Stay ahead of global energy trends with help from EWI's Energy Specialty Service

Let Steven help you find your next big opportunity in oil.

Learn how you can start today with Energy Specialty Service >>

Tuesday's Market Video Game Plan for Metals, Oil & SP500

Tue, 03 Apr 2012 15:50:44 +0000
by Chris Vermeulen

Hey Trader’s!

The next few trading sessions should be interesting with precious metals on the verge of a rally which should get the attention of traders and investors once again. If we can get investors to start looking at gold and silver again instead of high dividend paying stocks we will see gold hit $1800 an silver $37.

The SP500 has been pulling back and looks about ready to bounce going into the afternoon.

I recorded my morning analysis explaining what to expect in the market this week and the key support and resistance levels.

Watch Video Analysis: http://www.thetechnicaltraders.com/ETF-trading-videos/

Chris Vermeulen

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S&P 500	Stock Picks

Oil Trades & Forecasts

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Watch Video Analysis: http://www.thetechnicaltraders.com/ETF-trading-videos/

Looking for a Simple ONE Trade Per Week Trading Strategy?
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