Mish’s Daily: Can the Widowmaker Natural Gas Resuscitate?
Written by Michele ‘Mish’ Schneider
Probably the worst or at least one of the worst performers in the overall market and in the commodities market, natural gas is choppy and lifeless.
So why write about it?
For starters, we love an underdog. Perhaps a bit too contrarian, the reasons for the decline in natural gas may reverse quickly.
First off, much of the decline and lack of rally power is credited to cooler U.S forecasts.
Secondly, a decline in US electricity output has weakened prices.
Thirdly the rig counts and EIA reports have been mixed.
On the flip side, Australia LNG workers are striking.
Enbridge bid $14 billion for Dominion Utilities as the CEO described the assets the company is acquiring as “must-have” infrastructure for providing safe, reliable, and affordable energy.
We like to consider all the fundamentals as part and parcel of the technicals.
In other words, regardless of where natural gas goes in the next few weeks, the risk/reward looks tempting, provided there is a sound risk point. No stubborn trading.
Compared to oil prices, natural gas looks cheap.
Perhaps for good reasons, nonetheless, let’s examine the charts.
The first chart is of the ETF UNG. The top holding is the U.S. Dollar at 61.14%, which means that the ETF is heavy into cash.
This is similar to what we saw in MSOS the Cannabis ETF back on June 21st when we wrote an article called, Is Cannabis Finally Low Enough to Go High?
On dollar holdings our research found if an ETF allocates a significant portion of its assets to holdings denominated in US dollars it could be a defensive position during uncertain market conditions. Cash holdings can act as a buffer against market volatility or as a safe haven asset.
Since MSOS is up over 30% since that article, we wonder if UNG and its dollar holdings can lesson over time?
The UNG chart leads us to make a few assumptions.
- 1. There must be a high short float
- 2. The price is hanging onto the July 6-month calendar range low (red horizontal lone)
- 3. Our Real Motion indicator shows a BULLISH divergence with the momentum above the 50 daily moving average (blue) and in a bullish phase.
- 4. Our Leadership indicator shows UNG underperforming but this past week, the performance gained a bit.
- 5. Risk/reward is potentially stellar although with bottom picking, one must be aware of the risks.
The futures chart is of the October 2023 contract. There is a floor of support at $2.00. In September 2020, the last low before the huge explosion higher, was at $1.795.
A move over $3.00 looks more enticing. This is for educational purposes only. Trading futures and ETFs comes with risk.
If you find it difficult to execute the MarketGauge strategies or would like to explore how we can do it for you, please email Ben Scheibe at Benny@MGAMLLC.com, our Head of Institutional Sales. Cell 612-518-2482
For more detailed trading information about our blended models, tools, and
trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.
NOT TOO LATE Click here if you’d like a complimentary copy of Mish’s 2023 Market Outlook E-Book in your inbox.
Grow Your Wealth Today and Plant Your Money Tree!
“I grew my money tree and so can you!”- Mish Schneider
Mish in the Media
CNBC Asia Partial clip-Inflation 09-07-23
Singapore Radio 09-07-23
Money Life with Chuck Jaffe 08-29-23
Guest Host Final Bar Stockcharts 08-28-23
Yahoo Finance Pre Market 08-28-23
Business First AM DBA 08-23-23
Business First AM Nvda 08-22-23
September 12 BNN Bloomberg
September 12 Charting Forward StockchartsTV
September 13 Investing with IBD Podcast
October 29-31 The Money Show
S&P 500 (SPY) 440 support 458 resistance
Russell 2000 (IWM) 185 pivotal
Dow (DIA) 347 pivotal
Nasdaq (QQQ) 363 support and over 375 looks better
Regional banks (KRE) Another modern family member struggling here under 44
Semiconductors (SMH) 150-161 range to watch
Transportation (IYT) Broke the calendar range low along with XRT-not so healthy
Biotechnology (IBB) Compression between 124-130
Retail (XRT) 62.90 the July calendar range low broke down-along with IYT-2 negative signs