Natural Gas Fundamental Analysis Jan. 17, 2012, Forecast

Futures prices continued to drop finding a new 28 month lows  as the weather service predicts continued warm weather reducing demand for the heating fuel.
Natural gas futures for February delivery closed at USD2.547 plunging another 0.10%

Future prices have been under the psychologically critical USD3.00 level for quite some time and has developed as bearish sentiment after the Commodity Weather Group stated earlier that temperatures on the U.S. East Coast will likely remain mild, earlier.  With consumers being more caustious this year due to the economic situation and lower demand, Natural Gas prices have continued to plummet.

Front month future prices on the NYMEX have dropped in 15 of the last 18 trading sessions. Prices collapsed 12.8% last week alone, the largest drop in natural gas prices since August 2009.

Additional downward pressure on prices is expected after the U.S. Energy Information Administration stated it expects gas inventory to end October, 2012 at an all time record of 3.96 trillion cubic feet, while storage capacity is estimated to be just 4.4 trillion cubic feet.

Prices  have cascaded almost 29% since December. Compared to this month last year prices are 42% lower. Although all technical signals show Natural Gas as a strong sell, with its price at a bottom and the dead of winter in front of us, one cold spell could push these prices upwards.

Analysis and Recommendations:

Support and Resistance levels for tomorrow       S:            2.52        2.53        2.55

R:            2.57        2.59        2.6

Natural Gas Forecast Jan. 17, 2012, Fundamental Analysis

Natural gas prices declined on Monday on speculations that milder-than-average weather in the U.S will curb heating demand.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Fibonacci Will Earn You Money In The Forex Market

Every keeps telling me that I can earn high profits trading currencies with Fibonacci… I just need to find out who he is.

We know him as Fibonacci, but his real name was Leonardo Pisano, because Pisa was the town where he was born. His father’s name was Guillermo Bonacci. In Latin, the common European language of the time, “filius Bonacci” meant “son of Bonacci”. This was combined to make “Fibonacci”, similar in english to “Fitzgerald” (“son of Gerald”) or “Robertson” (“Robert’s son”) or “MacDonald” (“son of Donald”).

Now Fibonacci was born around 1170AD. So, if you are trying to reach him, you are out of luck, but if you do, please have him give me a call. That was a longtime ago, way before currency and before computers and before the Forex Exchange. One thousand years later, his name is used daily by many traders, written thousands of times a day on charts, on trading sites, in newsletters. This man probably never met more than a few hundred people in his entire life.

Fibonacci, was a mathematician, and wrote his first book entitled The Book of Calculations in the year 1202.

This sounds like a history lesson, not something to do with the complex matters of the Forex Exchange and Currency Trading. Fibonacci developed a set of numbers from two studies.

The best explanation I can offer comes from a history on the life of Fibonacci.

“In his first publication, Liber Abaci*, Fibonacci presented the problem:

A certain man had one pair of rabbits together in a certain enclosed place, and one wishes to know how many are created from the pair in one year when it is the nature of them in a single month to bear another pair, and in the second month those born to bear also. Because the above written pair in the first month bore, you will double it; there will be two pairs in one month. One of these, namely the first, bears in the second month, and thus there are in the second month 3 pairs; of these in one month two are pregnant, and in the third month 2 pairs of rabbits are born, and thus there are 5 pairs in the month; ..

And so on, he explains each month in turn. Finally, he concludes:

You can indeed see in the margin how we operated, namely that we added the first number to the second, namely the 1 to the 2, and the second to the third, and the third to the fourth, and the fourth to the fifth, and thus one after another until we added the tenth to the eleventh, namely the 144 to the 233, and we had the above written sum of rabbits, namely 377, and thus you can in order find it for an unending number of months.

So the zero we now place at the start of the sequence arguably doesn’t belong, especially considering it wasn’t part of Fibonacci’s puzzle problem that made the sequence famous.”

From this study he developed the Fibonacci sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

I know it sounds like a bunch of malarkey, but this sequence and these specific numbers have been tested and tested over and over again, and continually appear throughout nature and in mathmatic equations.

Many technical analysis experts rely on the use of Fibonacci numbers. We will take a more in-depth look at these strange numbers in a more advanced paper.

Believe me, many traders have used Fibonacci numbers to trade the forex markets and have earn high profits.

Take a look at this chart and see if you can find any magical numbers.

What are Economic Indicators?

When trading in the forex markets, there are there are two types of analysis. There is technical and fundamental analysis. Technical analysis is done by looking at price and other numeric values, such as volume, along with charts and graphs to develop trading cycles and forex trading strategies. We will look at this in another article on technical analysis and strategies.

Fundamental analysis is done by looking at history, news, economic data and information such as weather reports or political environments. If we were evaluating a company’s stock, we would look at their balance sheet and their profit and loss statement, their cash flow and their assets. In the currency markets, we cannot look at a balance sheet of a country or their financial statement, or analyze their assets; we have to look at economic indicators. And this is done through reports and data that are released by government agencies and private organizations that gather data about specific markets, such as ADP payroll reports, ADP is the largest private payroll processor in the USA, or a private organization such as the National Realtor Association, who reports on housing sales and pricing. There are also trade organization and associations, such as the National Bankers Association who provide information on credit card debt, loans and delinquencies. In Europe for instance, we watch for reports from the European Central Bank and comments drom the EU.

Data comes from many places. This data is very important to be able to predict the movement of currencies in relationship to one another. A currency trader needs to know what reports and data are coming out in China that might affect the price of oil that in turn might cause a change in price of the USD currency rate even though they are not directly related. A poor unemployment report might cause an effect on the value of the Japanese yen or as we have seen lately, the debt crisis in Greece has pushed the dollar up in value, only because investors were looking for a safe haven to place their money. Today, there is a strike in oil workers strike in Nigeria, pushing up the price of oil, this will ultimately effect currency values around the globe.

Each report and each country is inter-related and you cannot say I am only trading US dollars against the Australian dollar so I only need to watch those two currencies. The USD might surge because of totally different factors in another region of the globe pushing it up, while the Australian dollar remained the same.  A perfect example, came about just a few days ago. The USD was strong, the Sterling was weak, but the Euro was collapsing. If you were trading the USD/GBP, you would be buying, but if you were trading the GBP/EUR you would be selling. Against the dollar the pound was falling but against the euro the pound was rising. This was a classic situation, that happens often but is not usually obvious until it is over, In the case of the recent S&P downgrades of 9 european countries after the market session on a Friday evening. This began investors paradise.

There are several standard economic indicators that traders and investors rely on.

These are from each country and you can easily find these on economic calendars:

  • Gross Domestic Product (GDP)
  • Manufacturing
  • Retail Sales
  • Industrial Production
  • Consumer Price Index
  • Payroll and Unemployment Reports

Every developed nation releases these reports on scheduled dates. They are available on all economic calendars. These are the prime indicators that a good fundamental trader relies on. There are other reports that effect the currency markets, even more dramatically when economies are unstable.

 

Simple comments and policy changes from the central banks can throw the markets into turmoil or send a currency skyrocketing. We have also learned recently, how important a countries debt ratio as compared to GDP can be. All of these indicators should be evaluated and reviewed when trading currency and foreign exchange. For more information you can find articles about each of the indicators, what their numbers mean and how to use these to make good solid trades.

Natural Gas Fundamental Analysis Forecast January 16-21, 2012

Economic Events:

January 16:

US Markets are closed in observance of Martin Luther King Day

January 19:

At 15:30 GMT, The EIA will release the weekly natural gas storage change for the week. See comments below

Historical:

High      5.13 January 2011

Low        2.76 January 12, 2011

Support and Resistance Levels

  • S1: 2.9790 S2: 2.9590 S3: 2.9410
  • R1: 3.0170 R2: 3.0350 R3: 3.0550

 

Rule:

Natural gas is sometimes said to be the queen of all commodities, with Crude Oil being king.Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.

Trading natural gas is not for the faint hearted. Even by commodities standards, natural gas is a notoriously volatile market subject to wild price fluctuations.

Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration(EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.

When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.

A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.

Analysis:

Mild winter temperatures and steadily rising natural gas production extended this week’s natural gas price drop to $2.72 per 1,000 cubic feet in early trading.

Plummetting by 5.7 percent or 17 cents on Wednesday, natural gas prices are their lowest point in at least two years, and with natural gas production ratcheting up across the country, the fuel’s price does not look like its headed up anytime soon.

Last week some forecasts suggested much colder weather was coming in, and now this week those forecasts have backed off. That’s triggering prices to fall further. We knew this month was going to start of very mild, but now we’re seeing a return to mild weather until the end of the month, and that’s helping the market dig a bigger hole. You know the old saying the weatherman could not predict rain until he opened the window and looked outside.

By 2013, the U.S. Energy Information Administration is expecting the price of natural gas to rise above the $3, averaging $4.14 per British thermal units, according to its short-term energy outlook report for January 2012.

This week the range should stay close to the current trading with no unexpected reports or changes due.

2.67 to 2.75 is the expected range this week.

Just a side note, keep an eye on the Iran situation, if crude is pushed up, natural gas could go along for the ride.

If inventories keep setting new records, the glut in the fuel will only deepen.  In December of last year, inventories were at an estimated 3.5 trillion cubic feet, about 12 percent above the same time last year.

Natural Gas Forecast for the Week of January 16, 2012, Technical Analysis

Natural gas absolutely sliced through the $3 support level this past week, and has left no doubt as to the intention of the markets going forward. The market is far too weak to consider buying at this point, and the $2.50 level looks like it will be reached very quickly. The market could bounce as it has been sold off so rapidly, but those will be selling opportunities. The $2 mark is probably going to be targeted in the long run, and we feel that this contract could produce gains for sellers going forward as well. We like selling anything that even remotely looks like a rally at this point.

Natural Gas Forecast for the Week of January 16, 2012, Technical Analysis
Natural Gas Forecast for the Week of January 16, 2012, Technical Analysis

Natural Gas Forecast January 16, 2012, Technical Analysis

Natural gas fell hard on Friday as the onslaught in this market continues. The supply is simply far too large, and the lack of real demand in the northeastern United States is simply far too much for the bulls in this market. The $3 level gave way quickly, and it seems that we are in a freefall. The market simply cannot be bought at this point in time, and we don’t see a scenario where that will change anytime soon.

The move has been very steep lately, and this does cause us to be a little hesitant to add to any shorts we have running at the moment. Instead, we prefer to sell rallies at this point as they simply haven’t produced anything more than a selling opportunity lately, and a market that falls like this one has will almost always have some kind of short covering rally sooner or later. The market has simply fallen far too hard to think anything else will actually happen.

The next obvious support area is $2.50 or so, as it is a large handle. The level will more than likely attract bottom feeders, but there is nothing to think that it will offer anything more than token support. The market is absolutely broken, and there is over 14 trillion cubic feet of natural gas in the US alone backing up the supply chain. This means that natural gas is in a cyclical bear market.

We are selling those rallies, and at larger areas of resistance such as $3 we are willing to sell larger positions. Markets don’t behave like this very often, but when they do – the bottom simply doesn’t seem to appear. The bounces could be strong, but they will be short-lived, as there simply is no way for that massive supply to be worked through. The “quarters” will continue to be possible selling points on bounces as well, such as the $2.75, $3, $3.25 levels. As long as the supply situation continues, we can never think about buying this market, but only selling it on the bounces.

Natural Gas Forecast January 16, 2012, Technical Analysis
Natural Gas Forecast January 16, 2012, Technical Analysis

Natural Gas Fundamental Analysis January 16, 2012, Forecast

Economic Events:

US Markets are closed in observance of Martin Luther King Day

Historical:

High       5.13 January 2011

Low        2.76 January 12, 2011

Rule:

Natural gas is sometimes said to be the queen of all commodities, with Crude Oil being king.Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.

Trading natural gas is not for the faint hearted. Even by commodities standards, natural gas is a notoriously volatile market subject to wild price fluctuations.

Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration(EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.

When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.

A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.

Analysis:

Natural Gas continued its decline as mild weather was predicted for the next few weeks. There are no technicals in play at the moment, and gas will move with weather and demand, unless something unforseen happens with crude oil. Keep an eye on the Iranian situation.

Natural Gas Forecast Jan. 16, 2012, Fundamental Analysis

Natural gas prices declined on Friday, as forecasts pridicts milder weather across much of the U.S through late January, affecting demand for the furnace fuel.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Natural Gas Forecast January 16-20, 2012, Fundamental Analysis

Natural Gas Forecast January 16-20, 2012, Fundamental Analysis
Natural Gas Forecast January 16-20, 2012, Fundamental Analysis
Natural gas prices fell last week, as warmer than expected weather conditions boosted speculations of falling demand for natural gas as a heating fuel. While the EIA report showed natural gas inventories decreased by 95 billion cubic feet, above estimates of a decrease by 89 billion cubic feet. Nonetheless, natural gas prices closed the week lower.

Traders will be focused on the weather forecasts, as warm weather conditions are expected to weigh down on demand for natural gas, and that could push prices lower since demand for the heating fuel would decrease accordingly.

Highlights for this week that will probably affect the Natural Gas direction are:

Thursday January 19:

At 15:30 GMT, The EIA will release the weekly natural gas storage change for the week ending January 06, where the prior report showed that natural gas inventories decreased by 95 billion cubic feet.

Natural Gas Forecast January 13th, 2012, Technical Analysis

Natural gas markets fell again on Thursday as the downtrend simply will not relent. Inventory numbers did nothing to instill confidence, and half of the winter season in the northeastern Unites States has come and gone without even producing anything in the realm of serious snow, let alone serious cold. Because of this, the demand picture is extremely bleak for this season.

Normally, this market would be healthy this time of year as the demand from large cities such as Boston, New York, Pittsburg, Cleveland, Philadelphia, and Columbus would keep the market bid. However, with the recent discoveries of the massive natural gas deposits available through shale in Pennsylvania and Ohio, as well as many other fields in the US, natural gas is in abundance in the United States. In fact, the US is quietly becoming and energy exporter for the first time in decades.

As for the market, it is hard to argue with this trend. Any buyers of this market over the last year have been pummeled by the onslaught of selling. The 14 trillion plus cubic feet of natural gas that has been found in the United States certainly has this market struggling for the foreseeable future. One has to realize that Canada has almost as much natural gas as the US, and you can see how prices will be depressed for the foreseeable future.

Technically speaking, the market is far oversold. However, this isn’t the time to step in and be a hero by trying to buy the upcoming bounce. The pair is simply far too weak to even bother with that kind of trade. Rather, we are looking forward to the bounce as it will provide a higher level from which to continue to short this market.

The $3 level should now be massive resistance as it actually gave the sellers trouble last week, and this is simple common technical analysis – what was once support will now be resistance. The market will also find trouble getting past $3.25, $3.50, and $4. Because of this, selling rallies is simply the only way to go at this point in time.

Natural Gas Forecast January 13th, 2012, Technical Analysis
Natural Gas Forecast January 13th, 2012, Technical Analysis

Natural Gas Forecast Jan. 13, 2012, Fundamental Analysis

Natural gas prices declined on Thursday, as U.S stockpiles dropped by less than average last week, on the other hand, forecasts showed milder weather across much of the U.S through late January, affecting demand for the furnace fuel.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Natural Gas Forecast January 12th, 2012, Technical Analysis

Natural gas markets absolutely collapsed during the Wednesday session as the $3 support level is nothing but a distant memory now. The supply simply outweighs any real demand out there, and as long as that is the case – and it should be for years – there will be pressure on this market.

The video yesterday said that the $3 level was now cleared, and the session on Wednesday just proved that very fact. Needless to say, in a market like this you cannot buy the commodity at all. The direction is down, and it looks like that will be the case for some time. There will always be bounces of course, but the bounces are simply selling opportunities. We now expect the $3 level to offer massive resistance. We can only sell on rallies at this point, and will do so time and time again.

Natural Gas Forecast January 12th, 2012, Technical Analysis
Natural Gas Forecast January 12th, 2012, Technical Analysis

Natural Gas Forecast Jan. 12, 2012, Fundamental Analysis

Natural gas prices dropped on Wednesday, as forecasts showed milder weather across much of the U.S through late January, crimping demand for the furnace fuel.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Natural Gas Forecast Jan. 11, 2012, Fundamental Analysis

as meteorologists predicts colder than normal weather in late January, and that may boost demand on natural gas in the next few days.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will likely be lower than average over the coming period, and that could put natural gas between gains and losses.

Natural Gas Forecast January 11th, 2012, Technical Analysis

Natural gas fell again for the session on Tuesday, and even managed to close well below the $3 mark. The close at $2.91 tells us that the next leg down is currently underway, and we are going to be joining it. There is absolutely no reason to buy at this point, and this closing below the $3 level shows that the support level has given way. Selling on rallies is also a perfectly acceptable strategy.

Natural Gas Forecast January 11th, 2012, Technical Analysis
Natural Gas Forecast January 11th, 2012, Technical Analysis

Natural Gas Forecast January 10th, 2012, Technical Analysis

Natural gas markets had a very quiet session on Monday as traders continue to grapple with the idea of sub-$3 trading. The level is acting as support, but the reality is that the trend is down, and the situation in natural gas inventories isn’t changing all that much. Because of this we feel the downtrend will continue, and that selling is the only way to trade this market.

We look at all bounces as opportunities to sell, and would also sell the daily close below the $3 mark. The market cannot be bought at all, as the supply of natural gas in the United States is far too strong for the demand to ever deplete in any credible manner.

Natural Gas Forecast January 10th, 2012, Technical Analysis
Natural Gas Forecast January 10th, 2012, Technical Analysis

Natural Gas Forecast Jan. 10, 2012, Fundamental Analysis

Natural Gas Forecast Jan. 10, 2012, Fundamental Analysis
Natural Gas Forecast Jan. 10, 2012, Fundamental Analysis
Natural gas prices dropped as meteorologists predicts that mild weather will widen the surplus of the heating fuel, and that may affect the demand on natural gas in the next few days.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses.

Natural Gas Forecast for the Week of January 9th, 2012, Technical Analysis

Natural gas fell in the second half of the week to form a shooting star at the bottom of the recent downtrend. The market currently sits just above the $3 mark, and it looks like we are winding up breaking below it. The level is a natural one to offer support as it is a large psychological round number. The candle that formed for the week does suggest that a breakdown could be coming as the rally faded yet again. We are selling all rallies in this pair, and would be aggressively short if we can break below the lows form this shooting star.

Natural Gas Forecast for the Week of January 9th, 2012, Technical Analysis
Natural Gas Forecast for the Week of January 9th, 2012, Technical Analysis

Natural Gas Forecast January 9th, 2012, Technical Analysis

Natural gas rose during the Friday session as the $3 level continues to offer support in this long-beaten down market. The large psychological numbers always tend to attract value investors, and this time will be no different. However, the supply far outweighs the demand in this market at the moment, and should continue to do so for the foreseeable future. The rallies are to be sold going forward, and a break of the $3 level on a daily close would signal another round of selling as well. We cannot imagine a situation where we buy this contract at the moment.

Natural Gas Forecast January 9th, 2012, Technical Analysis
Natural Gas Forecast January 9th, 2012, Technical Analysis