Nattie’s Immaculate Reversal

F**k  Technical Analysis.  F%%k  Candlesticks.   That is the way we feel after yesterday’s post about the sure thing short in Natural Gas futures.  When you hear or feel “sure thing” in trading, head for the hills.  Hey, but we were right for about two hours in the pre-market, when the January contract traded down to 3.503, down 1.74 percent from last night’s close.

But Nattie is a wild beast,  a tiger  — it traded in a 6.1 percent range today and closed at it highs.  If you’re trading it, you’ve got to set your parameters and time frame carefully.  Remember this with caution:   JFK said in his Inaugural Speech way back in 1961,

“remember that in the past, those who foolishly sought power by riding the back of the tiger, ended up inside.”  – President Kennedy,   January 20, 1961

Rather than power lust, JFK could have just as well been talking about trading Nattie!

The January contract closed at a 52-week high and is a chip shot, .888% from yesterday’s 52-week high of 3.747…  Hmmmm,  .888,  what would the Chinese think?

In Chinese numerology, 888 has a different meaning, triple fortune, a strengthening of the meaning of the digit 8.[13] For this reason, addresses and phone numbers containing the digit sequence 888 are considered particularly lucky, and may command a premium because of it. – Wikipedia

Is this why they began their Summer Olympics on 8/08/08?    Now we will Trump Technical Analysis with  Chinese numerology.

Seriously, though,  For What It’s Worth,  “There’s something happening here” in Natural Gas.

In this scenario of abundant resources, U.S. companies have been planning on building pipelines and LNG export terminals to ship domestically-produced natural gas to Mexico, Canada and to future LNG export hubs along the coast. These exports hubs will be used for further LNG shipments to markets in South America, Asia, Europe, and the Middle East. – Fiscal Times

Take a look at the price differentials in Nattie across the globe (dated, for sure, but we believe relative prices haven’t changed that much).

nattie_world-prices

The $12 dollar differential in prices between Japan natural gas and the U.S.  will lead to an export boom in order to arbitrage these price differentials.   It is difficult and expensive,  for sure, but the price differential will continue to act as a compelling incentive to export.  It should be made easier under a Trump Administration.  The world price will eventually converge, with a premium for the cost of exporting,  sooner,  probably than later.

And Baby, It’s Cold Outside.

The first arctic blast of the season has hit — blanketing parts of the Rockies and Plains with subzero temperatures early Thursday and heralding a bitter freeze that will affect more than 200 million people.

But meteorologists are warning about a second, perhaps even colder chill that could spread into the East Coast and possibly portions of the South late next week. A shift in a weather system known as the Polar Vortex may be partially to blame, according to The Weather Channel. – NBC

We are perplexed by the Nattie forward curve, however.  Backwardation all the way to the December 2029 contract, which is quoted at 3.17. Very little trading and open interest in these long dated contracts, so take the the prices with a grain of gas, as there is probably very little price discovery or market signal in these contracts.   Maybe the market thinks fracking technology will also be exported and the world will have a terminal glut of Nattie?

So there you have it, folks.   Our attempt to retrofit fundamentals to a very impressive move in Natural Gas and to cover our ass on a bad call and trade in one of the nosiest commodities in the world.

nattie_12_8

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3 Responses to Nattie’s Immaculate Reversal

  1. guy says:

    Fantastic post!

  2. Pingback: 12/11/16 – Sunday’s Interest-ing Reads | Compound Interest-ing!

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