Natural Gas / NG - What, Truly, Is a Bull?
Updated
The terms "bullish" and "bearish" when used on Twitter and TradingView and in the media are more or less just poorly positioned synonyms for "going up" or "going down."
Yet, it's a misnomer because some of the craziest pumps you'll ever see are during bear markets, and some of the craziest dump-a-thons you'll ever endure are during the most parabolic bull markets.
Right now, the energy world is ablaze because the Russian Federation has more or less cut Europe out of Nord Stream 1 while Europe is already in the middle of an exceptional energy crisis, wrought by its own choices to follow the globalist-communist bloc in trying to punish Putin for a war in Ukraine that roots back to more than a decade of U.S.-NATO-led pot-stirring.
News like this causes Europe's natural gas futures to print remarkably stupid prices, making a huge amount of widows from those who were trading short, and energy companies who are paying those prices and yet cannot charge those prices to the end user because of socialist command economy policies placed by the government.
However, for North America's Henry Hub futures, Europe needing gas doesn't really help, because the Freeport terminal that's really the only place that LNG gets exported in any meaningful quantity blew up in July.
It was supposed to come back online in October. And yet, news of its delay until at least November already printed on Aug. 23.
Taking a look at the monthly, you can see that NG is still, really, historically cheap:
The Biden Administration is going to donate a great quantity of natural gas to Europe once Freeport is back online. In my view, we're going to see a new all-time high print. Something that starts with the number "2."
But before we get there, it's important to keep a cool head, and ask yourself: if Freeport has been offline since July and was set to come back online in October, why does price meander in this $8-9.50 range so early?
Taking a look at the weekly provides some context:
Before Freeport blew up in the first place, NG was flirting with $9. Once it blew up, it immediately took a three week liquidation spree to $5.50, with the worst part of that trip occurring on the final day of June as monthly futures contracts settled.
Then it bounced. And for a commodity whose market maker usually likes to whip it up and down and gap up and gap down with violence on daily and weekly opens, it really just went in a straight line back to $9.
Expanding down to the daily, it's even more obvious how much this traded like the SPX500 does when the Fed's money printer is doing work so that 75 year old men can mash buy and take a nap:
And now here we are, entering the second week of September post-Labor Day. All the propaganda outlets and pundits crank the sirens, chanting, "Europe Natural Gas Utilities Crisis Russia Gazprom Texas Heatwave High Pressure Heat Dome California Electric Grid Shortage!!!"
And all of that is true, just like all of that was true for WTI Crude when it traded at $125 for two months.
And yet somehow, despite the fundamentals and all the pundits calling for $180 and $350 BECAUSE REASONS, oil is down 30% and it still isn't finished dumping.
So, why is it?
It's not hard to figure out.
It really isn't.
Retail buys high because they see confirmation that something is going up, and then panic sells when it gets rugged.
And then when it goes back up they mash buy at a higher price than they sold at because of "Fear of Missing Out," and then they don't sell when they're in profit because their target on the SPX is 12,836 because Gann and Elliot said so, and everyone wants to be that guy you hear about who bought Google at $2 and held it for 20 years while playing golf.
If Shell or Exxon traded like that, they would be bankrupt, none of us would have electricity to read these words, and we'd all either die from heat exhaustion or freeze to death without AC and furnaces.
The reality is that when NG dumped at the end of July, it still didn't dump deep enough to enter a discount in this overall trading range. We've simply been watching what is still currently the 7th straight week of premium trading.
If Natural Gas is going to go to $20 when Biden starts donating energy to save NATO's European arms, it really would make a lot more sense if some time were spent so companies and funds could accumulate a significant position at a relative discount.
And indeed, there are at least two fat and curiously unchallenged double bottoms presented in the 4H chart that just happen to be in the sub-50% dealing range and at a price so low that it will have margin calling and leave ZeroHedge and Javier Blas from Bloomberg and friends in bewildered disbelief as to how energy commodities aren't worth anything "in a recession."
I often say that what a person thinks can happen and what is actually happening in this world and this Universe are simply two totally different things. A human being is heavily deceived by the slow grind of time and the ostensible appearance before their eyes.
Reality, on the other hand, simply follows a certain law and it will complete itself according to that law no matter how anyone cries about it. Whoever is in harmony with the law will establish themselves, and whoever is afoul of the law will get liquidated.
The caveat to this chart is time. I can only fit so many 4H candles in a window and so the time on this chart only extends into early October. These lower prices, if they really come, could happen later in October or even in November.
And while it'll really be quite the opportunity, it's also a "second mouse gets the cheese" kind of thing for those who are trying to get long for the moon at $7 and $6.
Yet, it's a misnomer because some of the craziest pumps you'll ever see are during bear markets, and some of the craziest dump-a-thons you'll ever endure are during the most parabolic bull markets.
Right now, the energy world is ablaze because the Russian Federation has more or less cut Europe out of Nord Stream 1 while Europe is already in the middle of an exceptional energy crisis, wrought by its own choices to follow the globalist-communist bloc in trying to punish Putin for a war in Ukraine that roots back to more than a decade of U.S.-NATO-led pot-stirring.
News like this causes Europe's natural gas futures to print remarkably stupid prices, making a huge amount of widows from those who were trading short, and energy companies who are paying those prices and yet cannot charge those prices to the end user because of socialist command economy policies placed by the government.
However, for North America's Henry Hub futures, Europe needing gas doesn't really help, because the Freeport terminal that's really the only place that LNG gets exported in any meaningful quantity blew up in July.
It was supposed to come back online in October. And yet, news of its delay until at least November already printed on Aug. 23.
Taking a look at the monthly, you can see that NG is still, really, historically cheap:
The Biden Administration is going to donate a great quantity of natural gas to Europe once Freeport is back online. In my view, we're going to see a new all-time high print. Something that starts with the number "2."
But before we get there, it's important to keep a cool head, and ask yourself: if Freeport has been offline since July and was set to come back online in October, why does price meander in this $8-9.50 range so early?
Taking a look at the weekly provides some context:
Before Freeport blew up in the first place, NG was flirting with $9. Once it blew up, it immediately took a three week liquidation spree to $5.50, with the worst part of that trip occurring on the final day of June as monthly futures contracts settled.
Then it bounced. And for a commodity whose market maker usually likes to whip it up and down and gap up and gap down with violence on daily and weekly opens, it really just went in a straight line back to $9.
Expanding down to the daily, it's even more obvious how much this traded like the SPX500 does when the Fed's money printer is doing work so that 75 year old men can mash buy and take a nap:
And now here we are, entering the second week of September post-Labor Day. All the propaganda outlets and pundits crank the sirens, chanting, "Europe Natural Gas Utilities Crisis Russia Gazprom Texas Heatwave High Pressure Heat Dome California Electric Grid Shortage!!!"
And all of that is true, just like all of that was true for WTI Crude when it traded at $125 for two months.
And yet somehow, despite the fundamentals and all the pundits calling for $180 and $350 BECAUSE REASONS, oil is down 30% and it still isn't finished dumping.
So, why is it?
It's not hard to figure out.
It really isn't.
Retail buys high because they see confirmation that something is going up, and then panic sells when it gets rugged.
And then when it goes back up they mash buy at a higher price than they sold at because of "Fear of Missing Out," and then they don't sell when they're in profit because their target on the SPX is 12,836 because Gann and Elliot said so, and everyone wants to be that guy you hear about who bought Google at $2 and held it for 20 years while playing golf.
If Shell or Exxon traded like that, they would be bankrupt, none of us would have electricity to read these words, and we'd all either die from heat exhaustion or freeze to death without AC and furnaces.
The reality is that when NG dumped at the end of July, it still didn't dump deep enough to enter a discount in this overall trading range. We've simply been watching what is still currently the 7th straight week of premium trading.
If Natural Gas is going to go to $20 when Biden starts donating energy to save NATO's European arms, it really would make a lot more sense if some time were spent so companies and funds could accumulate a significant position at a relative discount.
And indeed, there are at least two fat and curiously unchallenged double bottoms presented in the 4H chart that just happen to be in the sub-50% dealing range and at a price so low that it will have margin calling and leave ZeroHedge and Javier Blas from Bloomberg and friends in bewildered disbelief as to how energy commodities aren't worth anything "in a recession."
I often say that what a person thinks can happen and what is actually happening in this world and this Universe are simply two totally different things. A human being is heavily deceived by the slow grind of time and the ostensible appearance before their eyes.
Reality, on the other hand, simply follows a certain law and it will complete itself according to that law no matter how anyone cries about it. Whoever is in harmony with the law will establish themselves, and whoever is afoul of the law will get liquidated.
The caveat to this chart is time. I can only fit so many 4H candles in a window and so the time on this chart only extends into early October. These lower prices, if they really come, could happen later in October or even in November.
And while it'll really be quite the opportunity, it's also a "second mouse gets the cheese" kind of thing for those who are trying to get long for the moon at $7 and $6.
Note
Natural gas is really manifesting as a slaughterhouse."But what about the TEXAS AND CALIFORNIA HEATWAVE and the EUROPEAN ENERGY CRISIS?!"
Exactly. What about them?
It's just like dancing with a woman: two steps forward, one step back. Throw in a sudden swing or dip and then she blushes.
Note
Notice that Natural Gas swept the $8 psychological level and totally broke the bullish market structure, but didn't break the $7.5 double bottom.I've been anticipating it running to $8.6, which is congruent with WTi being faux-bullish at the moment and overextended.
Note
I have to say this monster of a bear killer was really suspect to occur the day before the weekly natural gas report.I just don't believe there's a moon to $10 ahead without $7.50 being taken out first.
Note
Also curious that it turns around and dumps _before_ Thursday's storage report.Imo if you were short and are in profit, I would get out.
I have this feeling to see a number like $9.7, again, before/during FOMC next week.
Unfortunately, before the $7.5 pivots get taken out, this market structure is ultimately only a bear on the 4H and below.
On the 1D+ it's still a bull.
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