Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Natural Gas Trumps Gold's Comeback...

Commodities / Natural Gas Mar 04, 2010 - 08:10 AM GMT

By: Oakshire_Financial

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleIn our report published November 20th, 2009, we recommended immediate action be taken regarding gold positions in general and in a particularly profitable, zero premium trade in silver that we had prescribed several weeks prior.  In the face of a steadily rising bullion price we said the following:


We at Oakshire Financial claim no crystal ball, but we have reason to suspect that the latest bull run in the precious metals – and gold, specifically – has gored its last banderillero.  A resumption of the long term, up-move is certainly in the cards for a later date, but we smell an intermediate trend correction now in the making that may last for months.

Here's the way gold – represented here by the SPDR Gold Trust – has looked since then:

The question now is whether those three months since gold's all-time high mark the end of the retreat, or if we're still in the midst of a downtrend, and the latest strength should be considered a mere counter-trend rally.

According to the rules of technical analysis, lower highs and lower lows (on the chart in blue) are indicative of a downtrend, and until we see a sharp move above the last retracement high at 114, that downtrend is considered in force.  Lower trading volumes in the last month and MACD weakness would also corroborate that conclusion.

In short, sit tight.  Until further notice, the gold decline is still on.

In Short We Trust!

That also goes for you folks who put on the convertible hedge we recommended with the Coeur D'Alene debenture back at the beginning of November of last year, when Coeur common shares were trading above $21 and your hedge fetched a delicious 10.9% annually.  Without getting too detailed, your short sale of CDE at $21 is still profitable and should be held.  Coeur is trading today at $15.40 and barely holding last-line support.  See here:


The trade has panned out well, and without belabouring it, we could see more profits in the months ahead.  Don't even think of unwinding the trade.  All the technicals support weaker CDE prices.  And if the long term moving average (in yellow on chart) is ruptured, gang way, friends; the next line of support is in the $10 range.

So what does this mean for the rest of our holdings, and what do we do next?

Glad you asked.  Moving forward, there are a number of reasons to believe that the pace of global economic growth will be restrained by both the recent rise in Chinese interest rates and the so-called crisis in Greece (and elsewhere) that will have to be backstopped (at the very least) by loan guarantees from the EU.

Add to this the need for fiscal restraint globally (after massive spending pledges to kick-start a moribund world economy last year) and we can see very little chance of interest rates rising anywhere in the foreseeable future.

That doesn't mean that we'll experience negative growth this year; indeed, year over year we're going to have a doozy of an expansion.  The chart below points to mainstream economic projections for the year ahead.

Note well the 2010 rate of growth expected in the U.S. as compared to the prior two years.  The American economy is clearly expected to lead the expansion through December.

And with global trade on the rise, we're also likely to see increased output from a manufacturing sector that was forced to curtail operations while a much needed belt-tightening was undertaken over the last eighteen months.  Here's a visual that depicts the expansion in trade levels since the recession hit.

Clearly, we're in an uptick. 

The global picture continues to point toward U.S. Treasuries remaining the address of choice for global investors interested in the safety of their principal and a modest return on their investment (more on this in coming issues of the RIR).  It also points to a continued bull run in stocks.  Remember: the full American stimulus package of $787 billion has yet to find its way into the economy.  Only a third of it has actually been spent.  In our estimation, that speaks to a healthier consumer, which, in turn, speaks to a healthier U.S. and global manufacturing sector.

The key here is inventory levels.  Most manufacturers let stocks deplete throughout the economic crisis, laying off workers and shuttering a good percentage of plant capacity in the process.  Those inventories now have to be restored to meet rising global demand.  Employment levels should benefit from these nascent increases in production.

Natural Gas Stockpiles also Depleted

Our recommendation this week is a timed trade that's aimed at exploiting two distinct factors outlined above: 1) the expansion we see coming in the year ahead, and 2) an indicator we've been watching closely for well over a year now: natural gas inventories.

For a variety of reasons, including the outrageously cold and snowy winter we experienced this past year, natural gas stocks have been significantly eroded since their peaks in the spring of 2009.  For the many who wondered how oil futures could rise so dramatically last year while natural gas prices floundered, here's your answer:

It was simply a matter of oversupply.  But with new factories coming onstream and capacity ramping up, gas stocks have dropped considerably.

In short, natural gas prices could be set for a significant increase in the face of any external, unseen supply shocks, or a hotter than normal summer that bolsters generation demand for electricity.  And with that backdrop in mind, we come to our trade.

Enbridge, Inc. (NYSE:ENB) operates the world's largest pipeline system, with over 6000 miles of crude and natural gas pipe criss-crossing North America.  The company also completed two new projects recently, Alberta Clipper and Southern Lights, which collectively will add nearly one million barrels per day to Enbridge's already dominant delivery system.

Enbridge currently offers a respectable 3.56% annual dividend and is up better than 50% in the last twelve months' trade, but the real play here is on natural gas, whose price should be pressured higher from its current tight stock situation. 

Here's a year's worth of Enbridge trading:

Moreover, Enbridge offers the most visible and sustainable future earnings projections of any of the pipeline majors.

Because it's so natural.

Good investing,

Matt McAbby,
Analyst, Oakshire Financial

Oakshire Financial originally formed as an underground investment club, Oakshire Financial is comprised of a wide variety of Wall Street professionals - from equity analysts to futures floor traders – all independent thinkers and all capital market veterans.

© 2010 Copyright Oakshire Financial - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Oakshire Financial Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Peter J Taylor
08 Mar 10, 17:56
Gold v. Natural Gas

As a Sterling investor I find that gold reached a new high this week, silver reached a new high (ignoring a couple of days in 1980) but natural gas has reached a multi-month low. It is the same in Euros. Your forecast of November 20th, 2009, was wrong, wasn't it?


Nadeem_Walayat
08 Mar 10, 19:18
Natural Gas Sterling
Natural Gas trend in sterling is that of higher highs and lows.

Highlighting a 2 month correction low is NOT investing, thats short-term trading or gambling.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in