- New Science in old markets -

Energy to weaken?

Yesterday there was a top extension at a daily scale in Natural gas futures. This has the usual meaning, that the present up-move will probable stall hereabouts. There may be a quick short trade here but this market is rising from monthly and weekly scale bottom extensions so this would be only for the suicidally brave. There is a better trade.

This comes at a time when the most recent Rbob gasoline contract has just expired, with a closing ‘squeeze’. The October contract rose sharply into its last day of trading, obviously caused by a shortage of deliverable gasoline. This would normally be a narrow ‘technical’ matter only of interest to physical traders of energy products but this was more interesting than that. This contract made a top extension on its last day – a kind of ‘last gasp’ of strength. Other, later delivery months only rose a little at the same time and failed to make new highs. The highs they did make we on a day when we expected a turn however and this means that we have that rare and desirable combination of a turn and an extension – even though they are in different delivery  months.

Our short-term reader cohort were advised to sell Rbob and other energy products yesterday and now we have this extra evidence of faltering strength from nat gas, we are sending it out to all readers. This weakness may not last long but it could be sharp, so we would take protective action on long positions in anything that will be affected by falling energy prices and would sell one of Heating oil, Rbob or crude oil, short.

Soya oil made a daily-scale bottom extension yesterday, after having broken down through a weekly-scale compression. Charts and more on this later, but the initial conclusion seems to be that we are forming a new range in soy and soya products and that this is now the low end of it.