Will Natural Gas See Negative Rates? | NATURAL GAS ($NATURALGAS)✨ Drop a comment asking for an update, we do NEW setups every day! ✨
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Natural gas demand hasn't fallen as much as oil, but a 2% decrease in demand (compared to oil's 6%), and already dwindling storage issues due to production not being curved enough and a warmer than normal winter, could have natural gas suffering the same fate as oil. That fate being temporary negative prices, due to a lack of storage, due to decreased demand, at least partially from COVID. With all of that in mind, even if this doesn't come to pass, the fear of it could drive prices lower. We don't want to short the bottom, but as we learned from oil, there is a scenario in which there is no bottom when it comes to expiring futures and a lack of storage. Still, the idea for today isn't a trade, it is mapping out some long term levels to keep in mind for whichever way price does move.
Resource: oilprice.com + www.naturalgasintel.com
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Fractal Trend is showing a downtrend (Maroon bar color) on the 3 day timeframe. This represents the longterm downtrend in natural gas.
Typically in a downtrend we are looking for short positions. With that said, natural gas's historic volatility could certainly produce some nice long setups on smaller timeframes if one of the support levels noted on the chart holds.
To the downside S1 - S4 represent supports of last resort for nat gas bulls. IF these levels are breached, we could be looking at negative rates for natural gas. Meanwhile, if demand picks up and storage becomes less of an issue, or if prices move up for any reason, then R1 - R3 present logical spots to look for reactions. Any volatile move from natural gas would be nice to capture, so we'll be keeping a close eye on all these levels, and specifically will have our interest piqued if S4 can't hold and we run into more supply/demand issues for natural gas itself.
Negativerates
US Stock Market Making 2nd Attempt at Parabolic Blow-Off TopI believe we will get either a blow-off top in the S&P or a fundamental event that kills the expansion, sending price below the magenta rising support line.
If the Fed is too slow to expand the balance sheet, then stocks can correct significantly until the Fed eases adequately.
If Trump wins and the Fed expands their balance sheet in 2020 at a fast enough pace, then spx will enter a blow-off top mania.
If Bernie or Warren win, a significant correction will take place but SPX may bounce once rates hit zero or negative.
If the Fed is slow to move (quite likely) then SPX will swing really violently and could get scary for some investors and traders
In my view, the SPX is only worth trading, it is not worth investing in. Now is the time to be getting out of US stocks and US dollars and into emerging markets and commodities.
Sometimes being a better investor means passing up immediate returns via central bank fueled irrational exuberance and waiting for an even better opportunity later once the music has stopped and everyone has been exposed. Impossible to predict the top, so better off not fully participating.
SPX - Relief Rally - Stimulus to the Rescue + Bonds/ Gold UpdateQuick SPX update:
~ Expecting a brief relief rally (haven't we all)
~ Target is in between the 38.2% and the 50% Fib retracement (2,650 - 2,800)
~ Looking for a potential move to the 21 daily ema, at which point i will be looking to go bearish again
~ The move will likely be on the back of the "positive" stimulus news, but i am very skeptical of how the markets will respond to this, which ultimately amounts to an admission that Covid19 is crippling the US economy and that one should expect higher inflation moving forward
Additional Analysis:
Gold ---> I believe that there are many key factors moving forward (i will elaborate in a further post), these include the demand for physical beginning to outstrip supply (premiums are reflecting this), the issue of the futures contracts being used to drive prices down as a policy tool (to prevent a further erosion of confidence) and the fundamental drive of higher inflation expectations. Overall i am very bullish on Gold going forward, but i also am expecting to see some near-term weakness.
US Bonds ---> The end goal is zero, make no mistake, US10Y and a host of other maturities will hit the "zero bound" within 12 months or even sooner. This will present a host of challenges, namely it will significantly reduce the attractiveness of US Treasuries as a safe haven, this will most likely drive capital into gold, leaving the only buyers as the Federal Reserve, thus the US will enter a death spiral, furthering their dependence on low/ negative rates.
I believe the best way to play this macro outlook, is to leave US bonds alone, yes there will be capital gains to make, but the yields are already so low, better to let that train leave the station without you, the USD will appreciate, at least in the near-term, so a play on DXY is on the cards. But the better play in my opinion is to use the yields as an indicator as to when to shift focus to gold, as when US bonds hit the zero bound, the carry cost for gold is now a non-issue and the yellow metal is now a much more attractive safe haven. In fact, this may very well be a contributing factor to the growing strength of gold, as other investors will also be keenly watching the yields on US Treasuries.
- TradingEdge
