Natural Gas - EIA Natgas Storage Report

After Friday's drop I started to analyze Natural Gas with watching the fundamentals much closer. Cycles alone are simply not enough for predicting future price in this volatile commodity.

Earlier this year I posted this idea :
I still think that we printed the 3 year cycle low back in August.I updated a bit the idea chart - as I was early when I was waiting for the bottom in May:

After Friday's massacre price dropped enough to break the trendline , but at the end of the day we stayed in the rising channel . Monday price bounced and Tuesday we had a massive short squeeze as price broke through the 50 SMA and tagged the 200 SMA . The day finished well below the 200 SMA - and the 50 SMA too - but bears tasted a bit how overcrowded the short side and this is not a one way street.

In the previous idea I was calling an early DCL on the 11th October:

but now it's clear it was only a half cycle low and we are back to the stretched daily cycles which are 75-85 days long.
The trendline break is quite normal at the daily cycle low just as the Bollinger Band crash signal and the 6 day RSI in the oversold territory.

So after the Aug.2. intermediate cycle low we have a DCL in place last Friday:

Who trusts in cycles - I do - knows that after the first DCL there is a good chance that the next daily cycle will right translate with a higher high above the November high.

So cycle wise I'm still expecting a daily cycle top somewhere above 2.8$.
And here comes the the advance of cycles vs to the fundamental traders.
Fundamental traders are still expecting 2.5-2.6 maximum on this bounce , but I don't want to lose the possibility of a 1$ bounce because of the mild winter forecasts and global warming. I 've seen NatGas dropping on hard winters and we might see it bouncing on a mild winter where sudden arctic blasts are painting the picture and confusing the forecasts.

I'm closely monitoring the near-term computer model outlook. This will be the main driver of NatGas prices in the following days.The drop on Tuesday fundamentally was driven by the December 10-15 forecast of an arctic outbreak. I'm following 2 models: GFS Ensemble model and the ECMWF ensemble model. There is an interesting divergence between the 2 models. While both model is forecasting a colder than normal mid December weather, the GFS coming in much colder than the ECMWF. GFS is showing blasts of arctic air after the the 13 of December causing significantly below normal temperatures.
So fundamentally we have both doors open to break up or break down in the following weeks , but if I'm watching the cycles and fundamentals together - knowing how overcrowded the short side in this market - I'm convinced that the surprises will move this market to or above 3$ in the following 2 months.

Today's report is coming out at 10:30 EST, the forecast is -22B.

Dec 05
Comment: The ECMWF and GFS model forecasts will meet somewhere in the future : the only question is where.
In the bullish case the ECMWF will close up to the GFS model and we get much colder than normal weather. In the bearish case the GFS will be catching up to the ECMWF model .
Arpi, whats happening with Natural Gas?
+1 Reply
@mkandy, A large fund was forced to close their positions on Sunday night.
mkandy chartwatchers
@chartwatchers, Arpi...Thanks for your prompt reply. What's your view on NGAS longterm?
A bottom this month or next above the 2016 4YCL (1.578)
It's possible we printed it sunday night.
chartwatchers chartwatchers
@chartwatchers, Rig count already halfed down.
Below 1.7$ noone will be drilling.
chartwatchers chartwatchers
@chartwatchers, wrong chart. This is the good one:
mkandy chartwatchers
@chartwatchers, Can we consider bottom printed @1.79 or still chances to tag near 2016 4YCL (1.578)
Again NatGas idea went so wrong. Some of followers will be lost.
+1 Reply
well it looks like there is a spike down to 1.79USD in prermarket trading earlier in the week and back up to the low 1.90's consolidating... I see no immediate divergences on the 4hr although MACD is turning up slightly, I would hesitate to guess we'll go lower. My target range is 1.68-1.73 for now. I believe 2016 was the 15 year super cycle low, however, there is still a small possibility 2020 could be it, however, we'd need to drop below 1.574 by my calculations for that to happen. The chief reason as to why i'm skeptical on a new 3 year lower low is that the last yearly cycle is clearly right translated... hence my belief the bottom is nigh. For those that are holding from much higher levels, next spike down could be a good opportunity to average down, that is if you believe in this practice. I have been burned doing so in the past, so do so at your own risk. Looking at a longer term horizon, it would seem inevitable we go much higher from here, the question is how long will it take?
How do you hedge your investments as the market has been playing against your idea?
+1 Reply
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