Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21

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