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Commodity update and nat gas short-sale recommendation

The broad trend in commodities is downward and we have seen a bounce since early March in the Continuous Commodity index after a daily-scale bottom extension in late February. That extension didn’t catch the low of the move but it put us on warning of rallies to come:

This led to our advice to buy selected energy contracts in the March 5th edition and was another reason for us to recommend staying long in both corn and soya bean markets:

The further advice to keep energy long positions until WTI crude approached an old compression at around $96 has been met as of today (the May Nymex crude high is $95.88  as I write) so we would liquidate those longs. Crude is the only one that would have been profitable – the other recommended trade (to buy Rbob) would be a small loss or a ‘scratch’ trade.

That CCI extension signal is now far enough in the past to have effectively expired and we expect price declines to resume soon. We have already recommended selling short copper and more recently soya meal and oil so now we turn our attention to potential energy shorts. The trio of Rbob, crude and heating oils are all possible candidates but there is a better one – natural gas. This has rallied from just above $3 per 10k mmBtu to just over $4 since the beginning of the year and there has been a daily-scale top extension:

Although the demand for it is growing, nat gas is also plentiful (as everyone now knows) and so it is probable that prices will tend to stay low. Accordingly, this seems like a good bet on the short-side for a drop of perhaps 30-40 cents maybe more.