US Stock Market Overview – Stocks Slide Driven Lower by Communications on Stimulus Fears

 

US stocks moved lower on Monday as concerns that a stimulus deal would need to wait until after the November general election weighed on shares. House Speak Nancy Pelosi has given the White House a 48-hour timeline to move forward with a deal. The spread of COVID-19 has accelerated which is reducing the chance of a V-shaped recovery.

Over the past 2-weeks, the stock market has been starting higher and ending lower, which is not a good sign. All sectors in the S&P 500 index were lower, led down by communications and energy, utilities were the best performing sector in a down tape. The VIX volatility index surged higher rising 2-points and recapturing the 29% level. The US home building index released by the FAHB surged to the high level on record but the gain was not strong enough to buoy housing sector stocks on Monday.

Home Building Index Surges

Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings.

The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74. Builders are struggling to ramp up production, and while housing starts and building permits are rising they are not even close to meeting demand.

Natural Gas Price Prediction – Prices Whipsaw as a Storm Enters the Caribbean

Natural gas prices whipsawed on Monday, making a lower low before rebounding sharply to close up on the trading session. Prices remain buoyed as the weather is expected to be much colder than normal through the plains and the mid-west while warmer than normal throughout most of the East coast of the United States. There is one disturbance moving through the Caribbean that has a 10% chance of becoming a tropical cyclone during the next 48-hours. Tropical storm Epsilon is expected to move toward the east coast of the US but is not likely to impact any natural gas infrastructure. Hedge funds added to long positions in futures and options according to the latest commitment of traders report.

Technical Analysis

Natural gas prices whipsawed and close higher on the session. Prices recaptured resistance which is now short-term support near the 50-day moving average at 2.76. Additional support is seen near the 10-day moving average at 2.72. Resistance is seen near the October highs at 2.95. The 10-day moving average is fast approaching the 50-day moving average and a crossover appears imminent. This would show that a medium-term uptrend is in place. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Hedge Funds add to Long Positions in Futures and Options

Managed money added to long positions and reduced short position in futures and options according to the latest commitment of traders report released for the date ending October 13, 2020. Managed money added 9K contracts to long position in futures and options while reducing short positions by 3K contracts. Hedge funds that are long futures and options outnumber short position in futures and options by 2.5 to one.

Gold Price Prediction – Prices Edge Higher on Strong Homebuilder Index

Gold prices continued to consolidate and attempted to move higher as the dollar declined. US yields moved higher which weighed on gold prices following a stronger than expected US Homebuilder Index. Concerns over the US general election and a surge in coronavirus cases in the UK have helped buoy the yellow metal. Gold volatility has eased and is currently trading near the lowest levels seen since the pandemic started to spread in February. Currently, gold “at the money” implied volatility is trading just shy of 21%.

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Technical analysis

Gold prices edged higher trading sideways and making little headway. Prices remain above short term support is seen near the 10-day moving average at 1,902. Resistance is seen near the 50-day moving average at 1,924. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum remains neutral as the MACD histogram prints in the black with an upward sloping trajectory that points to a slow trend higher.

Home Building Index Surges

Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings. The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74.

US Stock Market Overview – Stock Rise Led by Strong Retail Sales

US stocks were mixed on Friday, with the S&P 500 and Dow finishing the week in the black just shy of the all-time weekly closing highs. The Nasdaq finished in the red. Sectors in the S&P 500 index were mixed, led higher by Healthcare, Energy shares bucked the trend. US retail sales came in stronger than expected, rising nearly 2% month over month. US consumer sentiment was also positive, but the forward-looking subcomponent showed that consumers are getting anxious. The US budget deficit nearly tripled in the fiscal year ending September 30, 2020, as the pandemic generated huge spending.

Retail Sales Comes in Strong than Expected

US retail sales came in strong than expected as consumers accelerated their buying habits. US retail sales increased by 1.9% month over month. Expectations had been for retail sales to increase by 0.7%, up from a 0.6% rise in August. Excluding autos, the gain amounted to 1.5%, which also was better than the 0.4% estimate.

Electronics were the only major sector that was negative, dropping 1.6% from the August levels. Motor vehicle sales were a significant point of strength, rising 3.6% on the month and 10.9% from September 2019. That came as prices for used cars and trucks rose 6.9%, the largest monthly increase since February 1969.

US Consumer Sentiment Rises

The initial consumer confidence index for October edged up to 81.2 this month from 80.4 in September, according to the University of Michigan. That’s the highest level since March, just when the pandemic began to spread. The measures of current conditions slipped to 84.9 from 87.8, indicating Americans are paying close attention to the increase in COVID-19 infections. JPMorgan Chase & Co.’s tracker of credit- and debit-card transactions showed spending was down 5.7% compared with a year ago through the week ended October 12, reflecting a potential slowdown.

US Budget Deficit Tripled

The U.S. deficit tripled to a record $3.1 trillion in the fiscal year that ended September 30, as the government battled a global pandemic that plunged the U.S. into a recession in February according to the U.S. Treasury Department.

Natural Gas Price Prediction – Prices Rise on Cold Weather Forecast

Natural gas prices moved higher on Friday as colder than normal weather is expected to cover most of the mid-west for the next two weeks. This cooler weather will be offset by warmer than normal weather which is expected to cover the entire east coast. The number of natural gas rigs increased by one in the latest week according to Baker Hughes. The total number of active oil and gas rigs increased for the week by 13, with oil rigs rising by 12 and gas rigs rising by 1. Total oil and gas rigs in the United States are now down by 569 compared to this time last year.

Technical Analysis

Natural gas prices rallied 1.1% on Friday, remaining above support near the 50-day moving average at 2.76. Resistance is seen near the October highs at 2.95. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

Natural Gas Generators Take Market Share

Based on the U.S. Energy Information Administration’s (EIA) annual survey of electric generators, natural gas-fired generators accounted for 43% of operating U.S. electricity generating capacity in 2019. These natural gas-fired generators provided 39% of electricity generation in 2019, more than any other source.

Gold Price Prediction – Prices Consolidate Despite Robust Retail Sales

Gold prices barely moved on Friday inching lower and trading in a very tight range. The dollar declined slightly after rallying on Thursday as US yields consolidated.  The movement in the dollar and yield came despite a stronger than expected US retail sales report, that seemed to be countered by a slight dip in US consumer confidence.

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Technical analysis

Gold prices edged lower trading sideways and barely moving on Friday. Prices remain above short term support is seen near the 10-day moving average at 1,902. Resistance is seen near the 50-day moving average at 1,927. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum remains neutral as the MACD histogram prints in the black with an upward sloping trajectory that points to a slow trend higher.

Retail Sales Comes in Strong than Expected

US retail sales came in strong than expected as consumers accelerated their buying habits. US retail sales increased by 1.9% month over month. Expectations had been for retail sales to increase 0.7%, up from a 0.6% rise in August. Excluding autos, the gain amounted to 1.5%, which also was better than the 0.4% estimate.

Natural Gas Price Prediction – Prices Rise Following Inventory Report

Natural gas prices moved higher on Thursday following a smaller than expected build in natural gas inventories. The weather is expected to be colder than normal in the northern plains and mid-west over the next 8-14 days but warmer than normal across most of the east coast which could offset any increase in heating demand. There are currently no weather disturbances that are expected to generate a tropical cyclone over the next 48-hours according to the National Oceanic Atmospheric Administration.

Technical Analysis

Natural gas prices moved higher on Thursday, making a lower high and a higher high and rebounding back above resistance near the 10-day moving average at 2.75, which is now seen as short term support. Resistance is seen near the November highs at 2.95. Short-term support has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is neutral as the MACD (moving average convergence divergence) histogram is printing in positive territory with a flat trajectory that points to consolidation.

Natural Gas Inventories Build Less than Expected

Natural gas in storage was 3,877 Bcf as of Friday, October 9, 2020, according to the EIA. This represents a net increase of 46 Bcf from the previous week. Expectations were for a 51 Bcf build according to survey provider Estimize. Stocks were 388 Bcf higher than last year at this time and 353 Bcf above the five-year average of 3,524 Bcf. At 3,877 Bcf, total working gas is above the five-year historical range.

Gold Price Prediction – Prices Edge Higher but Remain Rangebound

Gold prices edged higher for the second consecutive trading session despite a sharply rebounding dollar and lower US yields. Since gold is priced in US dollars, generally as the dollar rises, it generates headwinds for gold prices. Additionally, US import prices came in at a 5-month low, which shows that inflation expectations are sliding.

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Technical analysis

Gold prices rebounded for a second consecutive trading session. Prices recapture short term support is seen near the 10-day moving average at 1,902. Resistance is seen near the 50-day moving average at 1,930. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram also generated a crossover buy signal rising above the zero-index line. Gold continues to trade sideways and needs a catalyst like either the dollar rallying or falling to drive volatility.

US Import Prices Rose in Line with Expectations

U.S. import prices rose 0.3% in September according to the Labor Department. This was the smallest gain in five months. Expectations were for import prices, to rise by 0.3% in September. Import prices fell 1.1% after decreasing by 1.4% in August on a year over year basis. Excluding fuel, prices of imported goods climbed 0.6%. U.S. export prices increased by 0.6% in September. The cost of oil fell 2.9% last month, reflecting the first decline since April.v

US Stock Market Overview – Stocks Gain Driven by Energy; Banks Continue to Show Strong Financial Results

 

US stocks were mostly higher on Wednesday rebounding from Tuesday decline. Most sectors in the S&P 500 were higher driven by gains in energy and materials, while real estate bucked the trend. US inflation on the wholesale level was hotter than expected in September according to the Labor Department. Goldman Sachs continued a streak of better than expected earnings from the large banks, driven by strong gains in trading.

Goldman Beats on the Top and Bottom Line

Goldman Sachs reported stellar Q3 financial results beat analysts’ profit estimates on stronger-than-expected results in bond trading and asset management. Goldman reported $3.62 billion in profit, or $9.68 a share, exceeding the $5.57 per share estimates. Revenue of $10.78 billion topped the estimate by more than $1 billion, driven by the trading and asset management divisions. The trading division generated $4.55 billion in revenue, a 29% increase from a year earlier. That gain was fueled by bond trading results of $2.5 billion, nearly half a billion dollars more than analysts expected. Equities trading revenue of $2.05 billion essentially matched expectations. The asset management division produced $2.77 billion in revenue, a 71% gain from a year earlier, and nearly $900 million more than the $1.91 billion estimate.

US PPI Rose More than Expected

U.S. wholesale prices increased more than expected in September, leading to the first year-on-year gain since March according to the Labor Department. The PPI index rose 0.4% in September after advancing 0.3% in August. PPI increased 0.4% year over year in September after falling 0.2% in August. Expectations had been for PPI to gain 0.2% in September on both a month over month and year over year basis. Core PPI, which excludes food, energy increased by 0.4% in September. Core PPI had increased by 0.3% for three straight months. Core PPI climbed 0.7% year over year. The core PPI rose 0.3% on a year-on-year basis in August.

Gold Price Prediction – Prices Rebound on Strong PPI Report

 

Gold prices rebounded slightly on Wednesday as the dollar eased paving the way for higher gold prices. US yields moved lower across the curve with the 10-year dropping 3-basis points to 72-basis points. US wholesale inflation figures came out stronger than expected following Tuesday’s CPI report which showed that consumer inflation remains tame.

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Technical analysis

Gold prices rebounded on Wednesday after dropping on Tuesday. Prices recapture short term support is seen near the 10-day moving average at 1,902. Resistance is seen near the 50-day moving average at 1,933. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line.  The MACD histogram also generated a crossover buy signal rising above the zero-index line.

US PPI Rose More than Expected

U.S. wholesale prices increased more than expected in September, leading to the first year-on-year gain since March according to the Labor Department. The PPI index rose 0.4% in September after advancing 0.3% in August. PPI increased 0.4% year over year in September after falling 0.2% in August. Expectations had been for PPI to gain 0.2% in September on both a month over month and year over year basis. Core PPI, which excludes food, energy increased by 0.4% in September. Core PPI had increased by 0.3% for three straight months. Core PPI climbed 0.7% year over year. The core PPI rose 0.3% on a year-on-year basis in August.

US Stock Market Overview – Stocks Close Mixed; Banks Outperform in the Q3

 

 

US stocks were mixed on Tuesday as the Dow and the S&P 500 closed lower and the Nasdaq notched up gains. All sectors in the S&P 500 index were lower on Tuesday driven down by losses in Real Estate and Financials, Consumer Staples was the best performing sector in a down tape. The big banks led off the earnings parade on Tuesday, with JP Morgan and Citigroup beating on the top and bottom line. US CPI came out in line with expectations, keeping US yields subdued. The dollar rallied which generated headwinds for the multinational companies.

Big Banks Start in the Black

Two of the largest US banks report financial results on Tuesday that came in better than expected. JPMorgan Chase & Co. reported that Q3 profit rose 4% from a year ago, beating expectations. Citigroup also delivered better-than-expected results. Strong gains in trading and investment banking continue to drive earnings.

Trading revenue jumped 30% at JPMorgan and 17% at Citigroup. Both banks set aside fewer reserves to cover bad loans in the quarter. JPMorgan set aside $611 million for potential future loan losses, far less than expected and the $10.47 billion it booked in the second quarter. Citigroup set aside $2.26 billion, down from more than $7 billion in each of the past two quarters. Despite the better than expected financial results, the financials were some of the worst performers in the S&P 500 index.

Inflation in the US Rises in Line with Expectations

The consumer price index rose by 0.2% last month after gaining 0.4% in August. Expectations were for CPI to rise by 0.2% in September. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand. A 6.7% jump in the prices of used cars and trucks again accounted for most of the increase. People who want to avoid public transportation scrambled to purchase used vehicles.

That was the biggest gain since February 1969 and followed a 5.4% advance in August. New motor vehicle prices rose 0.3%. On a year-over-year basis, the CPI increased by 1.4% after rising 1.3% in August. Excluding the volatile food and energy components, the CPI climbed 0.2% after rising 0.4% in August. The so-called core CPI gained 1.7% year-on-year, matching August’s increase.

Natural Gas Price Prediction – Prices Ease Despite Cold Weather Forecast

 

Natural Gas prices moved lower on Tuesday, easing after Monday’s rally. Prices declined by approximately 1.6%. Colder than normal weather continues to be forecasted to cover most of the mid-west of the US for the next 2-weeks increasing heating demand. There is one tropical storm headed to the Caribbean which has a 30% chance of turning into a tropical cyclone over the next 48-hours according to NOAA.

Technical Analysis

Natural gas prices eased losing 1.6%  after whipsawing on Monday. Support is seen near the 50-day moving average near 2.75. Resistance is seen near the September highs at 3. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. Short-term momentum has also turned positive as the fast stochastic continues to accelerate higher. The current reading on the fast stochastic is 81, above the overbought trigger level of 80 which could foreshadow a correction.

The Energy Information Administration Estimates a 12% increase in Inventories

EIA estimates that natural gas in storage ended September at more than 3.8 trillion cubic feet a 12% more than the five-year average. In the forecast, EIA expects inventories to be more than 4.0 Tcf on October 31, which would be a record high. However, because expected natural gas production will be lower this winter than last winter, EIA forecasts inventory draws will outpace the five-year average during the heating season and end March 2021 at 1.7 Tcf, which would be 6% lower than the 2016–20 average.

Gold Price Prediction – Gold Eases Rejecting the Latest Breakout

Gold prices dropped on Tuesday, as the dollar gained traction paving the way for lower gold prices. The Bond markets in the United States reopened after closing on Monday as despite lower yields gold prices moved lower. US inflation figures came out in line with expectations but the lower level of year over year increases weighed on the yellow metal.

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Technical analysis

Gold prices tumbled on Tuesday after consolidating on Monday and rallying on Friday. Prices pushed below the recent break out level near trend line resistance which was short-term support near 1,908. Additional resistance is seen near the 50-day moving average at 1,936.   Support is seen near the 10-day moving average at 1,901. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line.  The MACD histogram also generated a crossover buy signal rising above the zero-index line. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal in the middle of the neutral range.

Inflation in the US Rises in Line with Expectations

The consumer price index rose by 0.2% last month after gaining 0.4% in August. Expectations were for CPI to rise by 0.2% in September. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand. A 6.7% jump in the prices of used cars and trucks again accounted for most of the increase. People who want to avoid public transportation scrambled to purchase used vehicles.

US Stock Market Overview – Stocks Rally Ahead of Earnings Led by Financials

 

U.S. stocks rallied on Monday driven by a surge in technology stocks that put major indexes on track for their highest close in nearly six weeks. Most sectors in the S&P 500 index were higher on Monday, led by gains in the financial and communications sectors. Materials bucked the trend. Markets were also focusing on additional stimulus which is unlikely to be brought to the President’s desk until after the election. The markets seem to believe that a Biden victory with a senate sweep will provide a larger stimulus that with the current administration.

Apple shares rose move than 6% on Monday ahead of their October event where their new phones will be announced. Apple shares are now trading at 30-times earnings which is not cheap but less than many of its competitors. The VIX volatility index moved sideways but did not decline despite the rally in the large-cap index. The US dollar continued to move lower helping to buoy large-technology shares. The US bond market was closed for the day in observance of the Columbus Day Holiday.

Earnings season kicks off this week with the large banks. There is also a plethora of economic data including September CPI, PPI, industrial production, and retail sales along with the October Empire and Philadelphia Fed surveys.  The Senate began its confirmation process for President Trump Supreme Court Nominee Amy Coney Barrett. The Republican lead senate is desperate to get the confirmation concluded before the election. Barret is a conservative and if the Senate flips the new president will replace Ruth Bader Ginsburg’s seat with a liberal justice. Ahead of earnings technology shares were some of the best performers, helping to lift the Nasdaq 100 by nearly 3%.

Natural Gas Price Prediction – Prices Gap Higher but Close near the Lows

Natural gas prices whipsawed on Monday gapping on the open and closing near the lows of the day. There is a disturbance moving across the Caribbean Sea which has a 30% chance of becoming a tropical cyclone in the next 48-hours according to NOAA. The weather is expected to be colder than normal throughout the mid-west for the next 6-10 and 8-14 days according to NOAA which should increase heating demand.

Technical analysis

Natural gas prices whipsawed climbing 3.6%, but closing well off the highs of the trading session as traders took profits near resistance. Support is seen near the 50-day moving average near 2.75. Resistance is seen near the September highs at 3. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. Short-term momentum has also turned positive as the fast stochastic continues to accelerate higher.

Supply Rose in the Latest Week

Supply rose in the latest week. According to data from the EIA. The average total supply of natural gas rose by 0.5% compared with the previous report week. Dry natural gas production decreased by 0.2% compared with the previous report week amid production shut-ins in the Gulf of Mexico due to Hurricane Delta. Average net imports from Canada increased by 14.8% from last week.

Gold Price Prediction – Prices Consolidate Following Friday’s Breakout

Gold prices moved sideways edging lower on Monday, as the dollar continues to trading under pressure. The Bond markets in the United States were closed on Monday in observance of the Columbus Day holiday. Hedge funds remain long gold futures and options and barely changed their position according to the latest commitment of traders report released for the date ending October 6, 2020.

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Technical analysis

Gold prices consolidated on Monday after breaking out on Friday as the dollar tumbled. Prices held the break out level near trend line resistance which is now short-term support near 1,912. Resistance is seen near the 50-day moving average at 1,938.   Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line.  The MACD histogram also generated a crossover buy signal rising above the zero-index line. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal in the middle of the neutral range.

Hedge Funds Remain Long

Hedge funds barely changed their position in futures and options according to the latest Commitment of Traders Report released for the date ending October 6, 2020. According to the CFTC, managed money slightly reduced short position while slightly increasing long position. Open interest that is long gold futures and options outnumbers managed money that is short futues and options by a ratio of 4 to 1.

US Stock Market Overview – Stock Rise Led by Technology as the White Ups its Stimulus Bid

Stocks rose sharply on Friday allowing the S&P 500 index to notch up one of the biggest weekly advances in three months. Investors welcomed signs pointing to a decisive result in next month’s presidential election. The market now appears to be pricing in a Biden victor and the likelihood that the senate would also flip to the democrats. The betting markets now show Biden ahead (Predictit) by 30-points, and the Senate to flip to the Democrats by 20-points.

The White House announced that it is willing to increase the amount of the fiscal stimulus to 1.8-trillion which is still shy of the House of Representatives’ number of 2.6-trillion. Most sectors in the S&P 500 index were higher led by Technology and Healthcare, the Energy sector bucked the trend. The dollar sold off sharply helping to buoy gold and silver prices, which helped the mining sector. The VIX volatility index moved lower closing down nearly 9% for the week.

Expectations of continued strong housing data and robust growth in China helped lift copper prices to a 2-year high. Copper prices have been consolidating and now appear ready to resume their uptrend. A weaker dollar is helping commodities such as copper gain traction.

White House Increases Stimulus Offer

The White House has announced that it has increased its stimulus target and is preparing a $1.8 trillion coronavirus relief offer, its largest proposal to date. Treasury Secretary Steven Mnuchin is expected to discuss a new $1.8 trillion proposal with House Speaker Nancy Pelosi. The White House proposal marks a further narrowing of the distance between the administration and Democratic leaders over the bill’s overall price tag. Still, its nearly 0.8 trillion of the level that the House of Representatives wants and investors are unsure if a deal will get done ahead of the election.

Natural Gas Price Prediction – Prices Surge on Colder Weather Forecast

Natural gas prices surged higher on Friday rising 5.5% and finishing the session off the highs of the day. Colder than normal weather is expected to cover most of the mid-west of the US over the next 8-14 days which will likely buoy natural gas demand. Hurricane Delta is still active in the Gulf of Mexico which has disrupted nearly 20% of the natural gas production. The oil and gas rig count, an early indicator of future output, rose three to 269 in the week to October 8. The natural gas rig count dropped by 1 while the oil rig count increased by 4. The EIA forecasts that natural gas production will be down in 2020.

Technical analysis

Natural gas prices rose sharply on Friday falling shy of resistance near a downward sloping trend line that comes in near 2.87. Prices recaptured resistance near the 50-day moving average which is now support near 2.74. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The RSI also shot higher reflecting accelerating positive momentum.

EIA Forecasts Lower Production for 2020

EIA forecasts U.S. dry natural gas production will average 90.6 Bcf/d in 2020, down from an average of 93.1 Bcf/d in 2019. Natural gas production declines the most in the Permian region, where EIA expects low crude oil prices will reduce associated natural gas output from oil-directed rigs. EIA’s forecast of dry natural gas production in the United States averages 86.8 Bcf/d in 2021, down from 2020.

Gold Price Prediction – Gold Breaks Out of Trend Line Resistance on Dollar Weakness

Gold prices broke out above trend line resistance on Friday as the dollar broke down lifting all commodities to higher levels. US treasury yields traded sideways after climbing for most of the week. The White House has announced that it has increased its stimulus target and is preparing a $1.8 trillion coronavirus relief offer, its largest proposal to date. The additional stimulus would weigh on US yields and devaluate the dollar which led to the decline in the greenback paving the way for higher gold prices.

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Technical analysis

Gold prices moved higher rallying 1.65% on Friday as the dollar tumbled. Prices broke through trend line resistance which is now short-term support near recaptured resistance now support near 1,912. Resistance is seen near the 50-day moving average at 1,939.   Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line.  The MACD histogram also generated a crossover buy signal rising above the zero-index line. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal in the middle of the neutral range.

White House Increases Stimulus Offer

The White House has announced that it has increased its stimulus target and is preparing a $1.8 trillion coronavirus relief offer, its largest proposal to date. Treasury Secretary Steven Mnuchin is expected to discuss a new $1.8 trillion proposal with House Speaker Nancy Pelosi. The White House proposal marks a further narrowing of the distance between the administration and Democratic leaders over the bill’s overall price tag. Still, its nearly 0.8 trillion of the level that the House of Representatives wants and investors are unsure if a deal will get done ahead of the election.

Natural Gas Price Prediction – Prices Rebound Ahead of Inventory Numbers

Natural gas prices moved slightly higher on Thursday, forming an inside day. This followed the Energy Information Administration’s natural gas inventory report. The weather is expected to be mild and warmer than normal for the next 2-weeks which should reduce heating demand. Hurricane Delta continues to churn in the Gulf of Mexico which will knock out approximately 20% of US natural gas production. Another disturbance is moving off of Africa, with a zero percent chance of becoming a tropical cyclone in the next 48-hours according to NOAA.

Technical Analysis

Natural gas prices made an inside day with a lower high and a higher low which is a sign of indecision. Prices recaptured resistance which is now support near the 10-day moving average at 2.60. Resistance is seen near the 50-day moving average at 2.73. The 10-day moving average recently crossed below the 50-day moving average which means that a medium-term downtrend is now in place. Medium-term momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the red with a rising trajectory which points to consolidation.

Inventories Rise in Line with Expectations

Natural gas in storage was 3,831 Bcf as of Friday, October 2, 2020, according to the EIA. This represents a net increase of 75 Bcf from the previous week. Expectations were for a 76 Bcf build according to surve provider Estimize. Stocks were 444 Bcf higher than last year at this time and 394 Bcf above the five-year average of 3,437 Bcf. At 3,831 Bcf, total working gas is above the five-year historical range.