Natural Gas - The Girl Who Hopes You Remember Her

NYMEX:NG1!   Natural Gas Futures
Since the end of February, and more accurately mid-March, the volatility on Natural Gas has all but disappeared.

This is a good thing if you're bullish, because it's both consolidation and indicates accumulation.

It's also a good thing from a sentiment/narrative perspective because everyone has all but forgotten trying to gamble on BOIL.

Moreover, it's strange for Natural Gas to trade so cheaply in light of the situation with the conflict between NATO and Vladimir Putin and how it impacts both China and Xi Jinping and Europe.

I've said in many of my previous natural gas calls that $10 wasn't the top. And if that supposition is true, the fact that we're trading at such an enormous discount for so long is really notable.

Just look how big the discount is on the monthly:

One of the core tenants of 2023's thus far price action being a likely bottom is that Natty has swept out the $2 mark twice, the last time in April.

Since, it's then made a series of higher lows and now looks certain to make higher highs.

Moreover, on the weekly we see any red bars are continually traded through to the upside by the MM.

All of this comes while the algorithm has been playing around the December of 2020 monthly pivot.

The fact that $2 has been protected so strictly and that the high of the year was set at only $3, which it touched for only a day, a Friday, to start March tells us that the target is more likely to be up than it is to be down.

It is very hard for me to tell you if Natty is going to do $3.2, $3.5, $4, or $4.5. It may just double top at $3 and then go back to $1.8.

What I can say is that getting over $4 ought to have a high degree of resistance. However, if the algs push it through, it's going to take off and take off in a hurry.

One thing that is true is that you really should not be bearish on energy.

I also believe that the Nasdaq in specific is about to correct so violently that it's going to set a new low.

We may be in a scenario right now where we see something like:

  1. Equities correct
  2. USD up
  3. Energy up
  4. Metals up
  5. 10Y yield up
  6. VIX up

Instead of the usual everything down and everything up all at once shenanigans.

The world is running out of energy. Oil is not a bear market.

Worldwide and US production peaked in 2018 and hasn't come back.

A lot of the "oil" that is included in daily production numbers isn't actually crude oil but is "natural gas liquids" and other lesser substances.

In a climate where mankind is using more and more electricity and temperatures are getting hotter and hotter, there is no reason to believe that natural gas should stay this cheap.

How hot will July, August, and September be in North America?

Natural gas _is_ electricity. It's also plastics. It's also what the places that get winter use to fuel their furnaces to stay alive.

Are you really expecting $1.50?
Adjusting Natty's chart for contract settlement, today's green candle was a gap rebalance and the peak of the year was really $3.4.

Another 80 cents would amount to about a 30% move and be pretty nominal even if you insist on being bearish.
I came across a post on Twitter showing Nat Gas futures daily bars with RSI.

I don't normally use indicators and I don't believe in indicators, but I used to, and I have to say the RSI this high while the price action is so poor is really, really dangerous.

I still believe the target is up.

However, between this logic and my newly updated thesis on my crude oil call, I now believe the intention is to either double top or sweep that $3 range. $3.4 is probably the maximum and would be a real gift.
Check the comment section below for the latest analysis on price action.
Notable with Natural Gas is where it pumped to $3 last time is when the Canadian 2x Bull ETF likewise reverse split.

Right now, the number I'm looking at on Natty is $3.5

I think it will probably murder the stops over $3 and we'll have to see how it acts afterwards and determine if it's still bullish.
Adjusting for contract settlement since Natty rolled a new month yesterday and its $2.8 print doesn't impact the ETFs, I would say every dip here is a big buying opportunity.

I believe it will take $3 and shorts are definitely not safe.
Natty is about to make it run to $3, it would appear.

If it doesn't dump after $3 you absolutely cannot be short unless you want to die.
I posted this on Twitter but figured it would be good to update this call with too:

Orange line is Natural Gas, bars are ES SPX Futures, daily candles.

There's a correlation. Natty has begin to rally at market tops and an inversion in the curve has indicated bottoms in the equities market.

But short lived bounces in the equities market translated into stop raids on Nat Gas.

We'll have to see what the world holds through September.
With natural gas screwing around as it is, I no longer believe it intends to rip past $3.

Instead, the green and blue lines are the areas I'm watching.

I suspect it hits the blue one and then goes back towards $1.8 for a few months again, much to our consternation.
Natty took out a daily low without being bearish and the hourly candles are indicating an explosive upside move is coming.

Still may not see more than $3~.
Natty is acting like the last few days of price action have been stop raids, and it's not a very compelling downswing if you look at the daily bars.

Perhaps we really do see $3 this week.
When I was looking at Natty yesterday I was worried about the particular price action really being some kind of like slow fade without the initiative to get over $2.9-$3.

But the last two days, if you look at the daily bars, really give no reason to sell:

$3 really should be revisited. It's what happens over the high that will let us know what's next.
Natural Gas taking yesterday's low is extremely bad for even the $2.9 thesis.

Have to say it doesn't look good.


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