Last week January NG opened at $3.620 mmBtu and closed the week at $3.830.
The monthly chart says it all. First look at the highs the past 12-years. Would anyone like to take a guess at what happened in late 2000 to cause natural gas to double hitting the high in December 2000 of $10.100? You would be surprised, and does anyone remember Enron? By February 2003 we had a high of $11.899 and in 2005 the contract high was hit in December at $15.780. The final number to look at is July 2008, which hit $13.694. Of course in June-July 2008 everything was up on a very weak US dollar and that is when everything came crashing down. The move down from July 2008 to April 2009 was more than $100,000 per contract. So why the price spikes in 2000, 2003, and 2005? Could it have been low supplies and increased demand? Possibly. The spike in 2008 occurred in June and July, not a huge demand for NG at this time. Look at how volume has changed from 2000-2012. Now ask yourself what has caused this huge increase in volume? And that is where the answer lies. I did highlight the month of September as I find it a very interesting month for NG.
Proceed to Page 2 for the latest COT Data...
On the weekly chart below, with the modified ADX at 51.7, we see a strong weekly uptrend. Stochastics on the weekly chart are overbought. Looking at the Disaggregated COT, we see Producers net short -40,101 contracts, Swap Dealers net long 80,530 contracts, and Managed Money net short -2,583 contracts. Will we see natural gas retest $5.00? First we will need to see a break above $4.00 and increased buying and selling by big money to see $5.00 again.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...
Will 2013 bring another spike in NG? Anything in these markets is possible these days. However, will NG supplies be an issue for 2013? Let’s have a look.
Natural Gas inventories finished the 2012 Storage Injection season on October 31, 2012 at the record level of 3,923 billion cubic feet (bcf). This reflects a 3.0% year-over-year increase over 2011 inventories and is 6.8% above the five-year average (source-eia.gov). For demand to increase, we will need to see a cold winter here in Chicago and the rest of the North. Now, while I do not think we will have as mild a winter as last year here in Chicago, this Thanksgiving week is more mild than usual. Temperatures here in Chicago on Thanksgiving Day are forecast in the mid 60s with a possible temperature of 70. This may be the warmest Turkey Bowl my kids have played in.
To end this week’s Market Pulse I want to wish you and your loved ones a very safe and happy Thanksgiving holiday.
Have a prosperous trading week.
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