Natural Gas - EIA Natgas Storage ReportAfter 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:
Techincals:
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.
Fundamentals:
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.
