This is our weekly contribution to the Rose Commodity Group Website. SMC is a Commodity Trading Advisor (“CTA”) registered with the CFTC specializing in natural gas futures movement. The goal of our SMC Natural Gas Advisory service is to provide the best advice on NYMEX natural gas market movement in order for clients to establish the most beneficial hedging or speculative market positions possible as well as thoughtful insight for physical traders. We have been producing our standardized SMC publication since 2003, and clients have included hedgers and physical traders in end-use businesses such as agriculture, fertilizer, manufacturing, steel and other metals, paper, etc., as well as large natural gas producers, electric utilities, banks, gas marketing companies, and hedging institutions. Clients have also included speculators such as commodity funds, hedge funds, large banks, and high net worth individuals. In summary, we serve those entities that have a large exposure to upcoming movement in NYMEX natural gas futures and look to establish the best market positions possible. If you’d like to examine or compare our work for a few weeks, contact us at SMCnatgas@aol.com or (501) 240-6700. We provide snippets each week for the Rose Commodity Group Website. These brief comments are general market thoughts and should not be relied on for trading purposes.
Our approach to the market involves seasonal tendencies, fundamentals, experience, history, and technical considerations. It was developed and validated with profitable, speculative trading experience that spanned 13-years.
This Week’s Market Comments:
In our seasonal approach to the market, we break the year down into 4 seasonal periods. We are now in the January-March winter period in which market decline is the predominate tendency. In late December, we had put forth expectations for several market swings in the winter period which are discussed fully in our monthly and weekly reports. Our assumptions going in were that we would see several large market swings with the initial one to the upside and then a final downward swing to end such movement in late February or March.
As to the current situation, as anticipated, the first winter seasonal market swing was to the upside, as we had thought, and actually topped out in the mid to upper $3’s as we had targeted. After achieving $3.722 on January 15th, it has drifted all the way back down to as low as $2.543 with only a relatively brief counter trend rally along the way that went from $2.957 to $3.207. The downside has been facilitated by the elimination of the year-over-year storage deficit and the failure of February weather to live up to expectations in the eastern US. We consider this deep downside to be the large downward swing that we anticipated would conclude our winter seasonal in late February or March. Please review our full body of work as to our thoughts on how deep and how long this decline might go. We consider that we are in another modest recovery phase that could also be viewed as a countertrend bounce.
As discussed the last 2-weeks, there has been some year-over-year similarity in both fundamentals and market movement since early December, and so, we have begun referencing last year’s movement in how we think the more specific movement here in our current January-March winter is going to play out.
Looking ahead, with the failure of the market to break below $2.53 support the last 3-weeks, we consider that we have transitioned into a multi week recovery move like we had last year. The one last year eventually gave way to an attempt to extend our winter low point later in March, and we’ve been anticipating the same late season movement for this year. We look for the recovery movement to end at such time as it looks like the late February/early March arctic temperature pattern is going to break down.
As to the coming week, the NYMEX natural gas futures market is currently resting about 9-cents higher than the previous week at $2.717 after a week where it first opened ½-cent lower than the previous week’s close at $2.621, and then after putting in the low of the week in short order at $2.60, it headed higher to $2.726 on Friday afternoon and closed strong. As to the coming week, we generally look for our recovery to continue somewhat higher as long as long as 6-10 and 8-14 day temperature forecasts stay cold looking.
Much more detail on projected price level and timing of market movement for our entire January-March winter season is included in our weekly SMC Natural Gas publication. Our publication can be sampled by contacting us at (501) 240-6700 or SMCnatgas@aol.com.
Bio of SMC natural gas advisory service:
SMC is registered with the Commodity Futures Trading Commission ("CFTC") as a Commodity Trading Advisor ("CTA"), and as such, it has had the ability to trade speculatively for others and to provide advice to outside entities in regard to movement in NYMEX natural gas futures. At this time, SMC is solely engaged in the latter activity.
SMC was incorporated in 1988 and business endeavors have included founding, growing, and selling a natural gas marketing company, speculative futures trading, and, since 2003, a natural gas futures advisory service specializing in upcoming market movement. All endeavors with SMC have been successful with speculative proprietary trading activity especially so. As such, SMC market perspective and advice is backed with a successful track record in natural gas futures that began in 1991. Please feel free to call or email SMC with inquiries or questions at (501) 240-6700 or SMCnatgas@aol.com.
The market information and recommendations contained in this report represent the general opinions of the author and are not considered specific for any of the readers receiving our work. There is no guarantee of a successful outcome on any actions taken by readers. Such opinions are subject to change without notice. Principals and employees of SMC may or may not trade in the commodities discussed in this letter, taking positions similar or opposite to the positions discussed herein. The information contained in this letter is taken from sources we believe to be reliable, but it is not guaranteed by us as to the accuracy or completeness thereof and is provided to you for information purposes only. Commodity trading involves risk and is not for everyone.
This Market Report constitutes copyrighted material and may not be reproduced in any manner, either in part or in whole, without prior written consent from Rose Commodity Group. However, redistribution via forwarding of the full link to the report is permitted. Quotations (limit 3) from the report are permitted, so long as they are accompanied by attribution to Rose Commodity Group and a link to the full report.
This publication is presented for informational purposes only. While the information contained herein is believed to be accurate and factual, the possibility of error exists. Commodity trading is an inherently risky proposition and there is no guarantee that trades based on the information enclosed herein will result in profitable outcomes.
This post was written by Louis Rose