- New Science in old markets -

Nat Gas extends, so sell it. Bonds, bunds, BTPs drop from compressions

Natural gas futures extended at a daily scale yesterday, meaning that you should sell outstanding long positions immediately. These were recommended in the 5th November edition and the subsequent gain has been about 18%. The sharp rise yesterday after a longer run of gradually rising prices means that there is a slight chance of some more gains in the next 1 or 2 trading days, so we do not yet advise reversing into short positions. This is our plan however and any signs of reversal should be taken as confirmation that such a short trade should be taken. We will watch and advise as usual, but you may see intra-day signs that could act as a trigger before we can react. If so, go for it. The chart:

Ten year US Treasury notes, Bunds and BTPs (Italian government bonds) have all compressed and dropped, in the last few sessions which merely serves to confirm our existing bear view. This is important as the bond markets have been the mechanism by which money has been pumped into the faltering economies of the world by various central banks. If these bond prices are now going to fall further, the ‘knock-on’ effect on European and US equities may be severe – as it already is in Southern Europe. Stay short of these bond contracts. Charts:

More soon,