Holiday Gold, Oil and Index Trend Trading

Another holiday trading extravaganza!!!

Last week the market fell into its regular holiday tradition of light volume, as institutions and big traders enjoyed the holidays thus allowing prices to drift higher. We still have one more week of light trading volume before this year and holiday season is officially over.

Trading during low volume times is regularly misinterpreted. Many traders figure they should not be trading this time of the year but from my experience, the last two weeks of the year are amazing for short term swing plays or day trading. The market seems to be much more predictable when the large program traders are not involved.

Also the more speculative plays (small and mid cap stocks) always seem to out perform as buyers bid the prices higher into the light selling volume. This is most likely why we are seeing the NASDAQ and Russell 2000 indexes making some nice gains of late.

Take a look at the charts…

Broad Market & NASDAQ Low Volume Rally



GLD ETF Trading – Daily Chart
Gold prices broke down as expected in early December and are now nearing a possible bottom. The past 3 weeks have provided some very exciting day trades shorting spot gold prices. In the next few weeks I will be starting to provide more spot gold charts and intraday price action for all the international traders and futures traders 

I did not provide the chart of silver as it trades very similar to gold. When the time comes I will provide detailed analysis for entry and exit points for members.



Crude Oil USO Trend Trading
USO fund had a very nice pullback in early December and I pointed out a spec play at $35.50 with targets set at $37, $38 and $40. So far the first two profit taking targets have been reached.

Sorry for all the lines on the chart but sometimes it’s the only way to remember where all the crucial levels are for trading pivot points.



Natural Gas UNG Trend Trading
Natural gas trades like a bucking bronco. It’s a tough ride if you do not understand market psychology and apply strict money management to your positions.

Last weeks price action closed with a bearish candle after testing resistance twice. We could get a short trade this week depending on what happens from here. Let’s keep our eyes open for a low risk setup.



Market Trends Trading Conclusion
This year has been fantastic for making money, but next year will most likely be much more difficult if we see the market top and head south or trend sideways. The market topping is not an event; rather a process and trend following systems will start having more losing trades than winners as the market momentum shifts from up, to sideways then down.

Don’t get me wrong, I am not saying I think its going to roll over and head south, cause quite frankly no one knows what its going to do from this point forward. This is the reason we are in cash and patiently awaiting new low risk opportunities to place our money. The joy of trading with technical analysis is that you don’t care which direction the markets go because the analysis, if done correctly, allows you to profit in all market conditions using different trading strategies.

The board market, in my opinion, is way overbought due to the holiday rally. But we must remember there is another low volume week as we approach New Years and this could extend the rally more. Smaller trading positions should be used until we enter the New Year and volume steps back into the market.

Gold and silver are in a short term down trend and trading near a resistance level. We could see prices drop quickly or rally from here. So we are letting things unfold before making a commitment.

Oil continues to move higher and last weeks weakening US dollar helped give oil a boost.

Natural gas is trading at resistance and looks ready to head back down. The daily and 30 minute chart did not setup a signal to short Natural Gas, but it was very close.

As usual, I will update on the market and provide daily updates and trades to members.

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Crude Oil Closes Lower, Setting The Stage For Continued Lower Prices

Crude oil closed lower on Monday and below the 75% retracement level of this fall's rally crossing at 70.23 as it extended the decline off October's high. The mid range close sets the stage for a steady to lower opening on Tuesday.

If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.68 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 73.39
Second resistance is the 20 day moving average crossing at 75.68

First support is today's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16

Click Here For a Free USO Trend Analysis

Natural gas closed higher on Monday as it extends this month's rally. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends this month's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.895 would temper the near term friendly outlook in the market.

First resistance is today's high crossing at 5.409
Second resistance is the 62% retracement level of this fall's decline crossing at 5.565

First support is the 10 day moving average crossing at 4.911
Second support is the 20 day moving average crossing at 4.895

Click Here For a Free UNG Trend Analysis

The U.S. Dollar closed lower due to profit taking on Monday as it consolidated some of last week's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.75 would temper the near term friendly outlook in the Dollar.

First resistance is last Friday's high crossing at 77.12
Second resistance is November's high crossing at 77.27

First support is the 10 day moving average crossing at 76.04
Second support is the 20 day moving average crossing at 75.75

Click Here For a Free UUP Trend Analysis


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What’s Next for Stocks, Gold, Silver, Oil & Natural Gas?

The past three weeks have been interesting to watch as the Dow (DIA ETF) has broadened causing traders to be shaken in and out of positions. Commodities have been under pressure as the US dollar has risen. Below are some charts of these investments and what I think could happen in the next couple weeks.

DIA – Exchange Traded Fund
As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.

That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.


GLD – Gold Exchange Traded Fund
The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.

In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.



SLV – Exchange Traded Fund
Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.



USO – Oil Exchange Traded Fund
Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.

This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.



UNG – Natural Gas Exchange Traded Fund
The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.
I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.

Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.

The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.



ETF Trading Conclusion:
Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.

Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.

Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.

Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.


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Weak Dollar Boosts Commodities – So What’s Next?

Another fantastic week for precious metals as the US dollar continues its slide lower. Energy commodities like oil and natural gas are having some difficulty finding buyers.

When commodities start to trend they become very profitable for those riding them up or down. But when a short term trend starts to virtually go straight up (parabolic) then we must be prepared for a sharp pullback. Once the price starts to slide I figure a lot of short term traders will begin locking in profits, sending gold down.

I’ve recently discovered the Money Flows table from The Wall Street Journal and I gotta say it’s awesome. My thanks to John Townsend for bringing this resource as well as hidden gem play – DFSH – to my attention.

The Money Flow table calculates whether money is moving in or out of a stock or ETF on a given day, and whether it is selling on strength or buying on weakness. It also tells you if there are more up or down ticks. Really powerful stuff in my opinion.

For example, the GLD gold fund continued its move higher today as it must follow the underlying commodity. And though the fund traded higher institutions were selling their positions in masse. For every 9 block trades bought there were 100 block trades on the sell side. This is strong evidence that institutions/large traders are moving out of GLD. Indeed, over $161 million dollars moved out of GLD today alone and a total of $251 million dollars in the two days preceding today.

The SPY fund was 12 buy orders for every 100 sell orders. Today alone over $675 million was flowing out of SPY which his CRAZY huge. Just click here to check out the table!

GLD ETF Trading – Weekly & Daily Trading Charts
Gold continues to claw its way higher as trader’s trip over each other trying to buy this shiny investment. The weekly chart clearly shows a parabolic spike. Vertical spikes like this do not last for long, but the largest percentage of the move will be made riding this trend up with a tight stop.



SLV ETF Trading – Weekly & Daily Trading Charts
Silver is still trending up but lagging its big sister (yellow gold). The daily chart shows a nice mini bull flag and we could get an upside pop soon.



USO Fund Trading – Weekly & Daily Charts to Trade
Crude oil just does not have people participating. The dollar is dropping yet oil continues to be dormant. It has provided several intraday plays as it trades the top and bottom of the trend channel.



UNG Fund Trading – Trade the Weekly & Daily Charts
Natural gas really came to life today. It looks like people started to cover their shorts and it just kept running up for the entire session. I mentioned in a previous report that the $9 level could be a bottom and today’s reversal sure makes it look good to the eye. But if this is a short coving rally, prices are still headed lower yet.



ETF Trader Conclusion:
Gold continues its incredible rally and we love every minute of it. I keep moving our stops to lock in maximum gains while providing enough wiggle room for more growth.

Silver and precious metals stocks are lagging and that is a concern. The charts look solid but I think investors are not currently willing to pay higher prices for riskier plays which include silver and precious metal stocks.

Crude oil is just drifting lower in a controlled manner. The chart looks bullish but buyers just are not in a panic to buy it right now.

Natural Gas has put in a nice bounce this week. I expect a lot of this is short covering and it could rally to the $10.50 – $11.00 area if all goes well.

The broad market is starting to look and feel over bought. We could see the market continue higher Friday because of the holiday light trading volume which virtually always moves the markets, or whatever investment is HOT, higher. This is because the large traders take time off so there are not a lot of large sellers in the market. But be ready for next week because these nice lofty prices could start tumbling down.

I just want to wish everyone a great holiday!

Just Click Here to get our Economic Trading Indicator Tool and our Free Weekly Trading Reports.



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UNG Takes Baby Steps Toward Reopening

Sponsors of the United States Natural Gas Fund, UNG, took baby steps toward restoring the fund’s ability to issue new shares yesterday.

UNG is an exchange traded fund that invests in the natural gas futures market. The fund stopped issuing new shares on Aug. 12, citing regulatory uncertainty in the commodities marketplace. The Commodity Futures Trading Commission is investigating the role of ETFs in the commodities market and is expected to announce strict position limits for such funds. Many expect the $4 billion UNG ETF to exceed the allowable limits, as it controls a significant portion of the front-month natural gas futures market.

Since halting the issuance of new shares, UNG has traded at a sharp premium to its underlying net asset value, as demand for the fund has outstripped supply. As of 2:32 p.m. ET, Aug. 21, it was trading at a 16% premium to NAV. The sponsors of UNG have been looking for ways to maintain exposure to the natural gas market while reducing the number of futures contracts they hold. Yesterday, UNG secured a $500 million total return swap that could help.

Total return swaps are privately negotiated agreements between two parties to exchange cash flows based on the performance of a target index. In this case, UNG entered into an agreement with a bank to exchange cash flows based on the performance of a front month natural gas futures contract. Because swap contracts are privately negotiated and not linked to any underlying holding, they should not count toward any new CFTC limits.....Read the entire article.

5 ETFs That You Need to Look at Right Now

The five ETFs that we are referring to are going to play a major role in the future and you need to know about them today.

In this short video we show you the overriding trend and potential for each of these markets in the future.

Just click here to watch the video and as always our videos are free to watch and there is no need for registration.

Crude Oil and Natural Gas ETF Trading

The past week in gold, silver, oil, natural gas and the broad market wasn’t anything to write home about. We are seeing controlled profit taking which is making the market choppy. Many traders are getting very bearish on the market which is a good thing in my opinion. According to my market internals, sentiment and volume analysis we should get a shake out (sharp dip) which would make traders exit their positions before the market continues higher.

Some trader’s say we are in a bull market, others say we are in a major bear market. Either way the trend is up on the daily and weekly charts and companies are making money. Buying on over sold dips has been very profitable this year. Until I see things drastically change, this is my strategy for the broad market.

Lets take a look......

Crude Oil – USO Exchange Traded Fund
Oil has been making a strong rally after breaking out of is multi month consolidation pattern. We are now looking for some type of pullback or test of breakout for another low risk entry point.


Natural Gas – UNG Exchange Traded Fund
Natural gas is having some trouble breaking out above the multi month resistance trend line. Buying here is a 50/50 bet and I will wait for another entry point before putting our money to work.


Crude Oil and Natural Gas Conclusion:
Overall, the market feels ready for quick snapback to shake traders out of profitable positions. I expect a resumption of the up trend as the market slowly creeps higher at a steady pace digesting each rally with sideways movement.

I know many people are shorting the broad market and that is not something I am willing to do yet. Until I see a drastic change, long positions are my bread and butter. Once the market does reverse, there will be plenty of time to play the short side using the Leveraged ETFs.

Commodities are taking a breather but with our support trend lines nearing I expect some movement this week.

If you would like receive these FREE weekly trading charts from The Gold and Oil Guy, Just Click Here!

Weekend Update: UNG - US Natural Gas Fund ETF

Considering how UNG has been trading in the past few months, this weeks trading was "relatively" stable. This is evidenced by the width of its Bollinger Bands which are tighter than normal. Additionally, UNG is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

UNG's MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9day moving average or signal line. This suggests that positive momentum has begun to slow.

On Friday one of our favorite buy/sell indicators, the Parabolic Sar, showed the UNG closing above the trigger point for the Parabolic SAR and is currently registering a bullish signal. The current Significant Point, below which a reversal to the bearish side would occur, is 10.99.

The Stochastic Oscillator is registering a bearish signal as the %K is below the %D. However, UNG is neither overbought nor oversold.

The RSI is currently at 46.56%, just below the critical 50% line which indicates that the stock is neither overbought nor oversold. Keep an eye on the trend of the RSI to see if the internal strength of UNG is improving or weakening.

Smart Scan Chart Analysis of UNG

Our "Smart Scan" technology shows a strong downtrend in place and that downtrend looks to continues negative longer term and for this market to remain weak. If trading this strong Downtrend make sure to use tight money management stops. The triangle Smart Scan is showing indicates the presence of a very strong trend that is being driven by strong forces and insiders.

Based on a pre-defined weighted trend formula for chart analysis, UNG scored -90 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

+10......Last Hour Close Above 5 Hour Moving Average
-15......New 3 Day Low on Thursday
-20......Last Price Below 20 Day Moving Average
-25......New 3 Week Low, Week Ending October 17th
-30......New 3 Month Low in September
-90......Total Score



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Oil Trades Slightly Lower Overnight on Short Covering in The U.S. Dollar

Crude oil was steady to slightly lower overnight as it consolidates some of Wednesday's rally. Stochastics and the RSI are overbought but are neutral signaling that sideways to higher prices are possible near term.

If December extends this month's rally, weekly resistance crossing at 84.83 is the next upside target. Closes below the 20 day moving average crossing at 74.33 would confirm that a short term top has been posted.

Friday's pivot point, our line in the sand is 80.88

First resistance is Wednesday's high crossing at 82.00
Second resistance is weekly resistance crossing at 84.83

First support is the 10 day moving average crossing at 78.39
Second support is the 20 day moving average crossing at 74.33

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Natural gas was higher due to short covering overnight as it consolidates some of Thursday's decline. Stochastics and the RSI are diverging and are turning bearish hinting that a short term top might be in or is near. Closes below the reaction low crossing at 5.280 are needed to confirm that a short term top has been posted.

If December extends this rally, June's high crossing at 6.170 then the 25% retracement level of the 2008-2009 decline crossing at 6.450 are the next upside targets.

First resistance is Wednesday's high crossing at 5.989.
Second resistance is June's high crossing at 6.170.

First support is Thursday's low crossing at 5.580
Second support is last Thursday's low crossing at 5.280

How To Find Winning Trades In Any Market

The U.S. Dollar was higher due to short covering overnight as it consolidates some of Wednesday's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If December extends this year's decline, monthly support crossing at 73.39 is the next downside target. Closes above the 20 day moving average crossing at 76.27 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 75.66
Second resistance is the 20 day moving average crossing at 76.27

First support is Wednesday's low crossing at 75.08
Second support is monthly support crossing at 73.39

Mid Week Oil and Natural Gas Trading Report

Commodities so far this week have not changed much. But I can point out a few things for us to watch Thursday and Friday.

Energy – Oil USO Fund – Energy Stocks XLE Fund
We are seeing a similar pattern in the energy sector. Oil had a nice move higher today while energy stocks sold off. Stocks are starting to fall out of favor.



Natural Gas – UNG Fund
Natural gas is still in a bear market and trading under a major resistance trend line. This commodity could go either way so I am going to wait for the odds to be more on my side before jumping on board with a long or a short trade.



Mid-Week Oil and Nat Gas Conclusion:
The market is starting to look and feel top heavy with many indicators and price action patterns giving cross signals. While the market could continue to rocket higher with new money getting dumped in from average investors because of solid 3rd quarter earnings, we must be cautious by tightening our stops and take some profits off the table. Until we get a short term oversold market condition I am trading very conservatively.

Waiting for a good trade is crucial in trading. If you always want to trade and force positions when the market is choppy you end up with lower probability trades.

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Record Supplies Have Not Deterred Natural Gas Bulls

The old saying 'every dog has its day' could certainly apply to the Natural Gas futures market as the December futures contract has risen to highs not seen since June, despite a record amount of natural gas in storage. It is still too early to tell to what extent the recent rally may be due to speculative short covering. The most recent Commitment of Traders report shows large non commercial traders were holding a net short position of 64,050 contracts as of October 13th. This was a decline of 1,902 contracts for the week and does not take into account the activity that occurred during the nearly 0.750 point rally since the report was released. Also adding a bit of bullish fuel to the recent rally are predictions that a weak El Nino weather pattern may result in a colder than normal winter.

If true, it may cause utilities Gas usage for heating demand to increase, helping to cut into the current burdensome supplies. Traders are also beginning to anticipate an uptick in industrial demand now that there are signs that the worst of the recession is behind us and an improvement in industrial production may not be far off. However, until we start to see fresh buying entering the market, any major rally attempts could be met with eager sellers, especially with futures trading above cash prices. Traders should monitor government data to gauge the extent of any economic recovery, as Natural Gas futures have been acting as a barometer to economic conditions here in the U.S......read the entire article and charts.

USO and UNG Technical Analysis with Idan Koren

From guest analyst Idan Koren....

Today we look at the USO and UNG and try to decipher where they are headed and what possible trades could be on the table. We believe that the USO is the reason why the S&P remains up while other stocks have potentially topped already.

Mid-Week UNG & USO Trading Charts

Commodities and stocks have been on fire the past two weeks and I think it just may be time for things to take a breather. While I continue to stay long, taking some money off the table to lock in profits is a safe play.

Just from a quick glance at the charts we can tell the odds are pointing to some type of pause or pullback in the coming days. I figure any day now we could see some profit taking.

Natural Gas ETF Trading – UNG
The Natural Gas ETF sure has given everyone a wild ride in the past 6 months. The bear market is still in place which can be seen on the daily chart. So far this week the price has broken down and trading at the $11 support level. This fund could generate a buy or sell signal with my trading model in the coming days so I am waiting for a clear entry and exit point before jumping on the gas wagon.


Crude Oil ETF Trading – USO
The Crude Oil ETF has broken above its resistance trend line this week but still struggling to move above the August high. Volume is declining while the price rises which is a bearish indicator. USO looks ready for some type of a pullback as it digests this breakout before moving higher.


Mid-Week ETF Trading Report
What does the general public hear and think about the stock market?
From recent emails, local financial news shows, family, friends etc… all I am hearing is how strong the market is. Indexes are making new yearly highs and company earnings are better than expected this quarter. Sounds like all we need to do is buy and life will be great!

Well in my opinion the market is the perfect tool for misguiding and frustrating the general public. All my indicators are telling me we need more of a correction before rallying much higher. The market (smart money) generally anticipates good and bad news several weeks if not a month in advance. So the question is:

Are company earnings already priced into the market?

Is all this positive market coverage getting the general public to buy up here at this possible market top? The answer is, only time will tell. No one knows for sure what the market is going to do but short term moves can be predicted with relatively high accuracy.

Don’t get me wrong, I am still bullish on the market but with all this good news becoming public information you have to wonder what is next. I am still long the market but trimming my positions to lock in profits and still stay in the game.

If you would like to receive Chris Vermeulen's free weekly trading analysis please visit his trading website The Gold and Oil Guy.

Deciphering Current Natural Gas Market Data

In the last six weeks natural gas futures prices have jumped from a modern day low to nearly $5 per thousand cubic foot (Mcf) as commodity traders and investors started to cover their short positions in this fuel as the days moved closer to the beginning of the winter heating season. The jump in the gas price ends what has been an extended price slide that started back in summer of 2008 when prices were in excess of $13 per Mcf and early signs of the developing global recession emerged.

The jump in the gas price ends what has been an extended price slide that started back in summer of 2008....


The traders and investors who have been covering their negative bets on natural gas prices have been motivated by signs the nascent U.S. economic recovery is gathering strength, especially among sectors such as automobiles and home construction that are large consumers of natural gas and its components as feedstocks for petrochemical materials. Additionally, there.....read the entire article.

UNG Mulls Investment in Interests Outside Futures

NEW YORK, Oct 13 (Reuters) - United States Natural Gas Fund (UNG.P), an exchange traded fund in the natural gas market, reiterated on Tuesday that it could invest in interests other than futures contacts to comply with accountability levels and position limits.

UNG told Reuters last month it rebalanced its portfolio to decrease positions in listed natural gas futures, while increasing the fund's holdings in over the counter natural gas swaps.

In a filing Tuesday, UNG said it may invest in other interests including cash-settled options on futures contracts, forward contracts for natural gas, cleared swap contracts and over the counter transactions based on natural gas, crude oil and other petroleum based fuels.

UNG said that despite the move futures contracts will remain its principle investment. (Reporting by Edward McAllister; Editing by Lisa Shumaker)

Crude Oil Higher as Net Long Positions Return to 2009 High

Crude oil was higher overnight as it extends the rally off September's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If November extends the rally, September's high crossing at 73.58 is the next upside target. Closes below the 20 day moving average crossing at 70.22 would temper the near term friendly outlook in the market.

Monday's pivot point, our line in the sand is 71.58

First resistance is the overnight high crossing at 73.13
Second resistance is September's high crossing at 73.58

First support is the 10 day moving average crossing at 70.54
Second support is the 20 day moving average crossing at 70.22

Here is Some Potential Mega Trades For Q4


Natural gas was higher due to short covering overnight as it consolidates some of last Friday's decline. Stochastics and the RSI are diverging and are neutral to bearish signaling that a short term top might be in or is near. Closes below the reaction low crossing at 4.351 would confirm that a short term top has been posted.

If November extends the rally off September's low, August's high crossing at 5.133 then the 50% retracement level of this year's decline crossing at 5.320 are the next upside targets.

Nat gas pivot point for Monday is 4.84

First resistance is last Tuesday's high crossing at 5.12
Second resistance is August's high crossing at 5.13

First support is last Friday's low crossing at 4.75
Second support is the 20 day moving average crossing at 4.74

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The U.S. Dollar was lower overnight as it consolidates some of last Friday's rally but remains above monthly support crossing at 75.73. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term.

If December extends this month's decline, monthly support crossing at 73.39 is the next downside target. Closes above the reaction high crossing at 77.74 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 76.80
Second resistance is the reaction high crossing at 77.74

First support is last Thursday's low crossing at 75.68
Second support is monthly support crossing at 73.39

Devaluation of the Dollar Spurs Oil Investment

"Oil had a couple of things going on today -- most notably, the dollar went through its low from September," explained Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska. "So we've got this pressure in the dollar, and that is sparking all kinds of buying interest in commodities." Investment in the commodity is increased when the value of the dollar falls because oil is traded in the greenback and investors holding other currencies are able to purchase oil at a cheaper price. "We saw the dollar coming under pressure today on the idea that maybe the economy is still going to sputter around here for a while as we go into the fourth quarter, early first quarter of next year," Newsom continued.

"Even though the Federal Reserve hinted that in 2010 we would start to see interest rates possibly start to go up, certainly there is no indication now that is going to happen any time soon; and again with the dollar moving to the new low, it would seem to confirm that idea that we're in this time where we're going to just hold low interest rates.....read the entire article

So You Think It's Time to Buy UNG? Let's go to The Chart!

In all of my years of trading I have never seen so much attention given to natural gas by the retail investor. Nat gas has been trading at historic low prices recently so it must be ready to skyrocket, right? Well for you traders out there that like me are old enough to remember the sugar market of many years ago, you have to admit natural gas and especially UNG is starting to show some similarities.

So where is UNG headed? Let's see what our MarketClub tools tell us....

UNG Smart Scan Chart Analysis is showing a downtrend with Up arrow, meaning there is some near term rallying power. However, this market remains in the confines of a longer term downtrend Downtrend, trade with tight money management stops.

Based on a pre-defined weighted trend formula for chart analysis, UNG scored -75 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10.....Last Hour Close Below 5 hour Moving Average
-15.....New 3 Day Low on Thursday
-20.....Last Price Below 20 Day Moving Average
+25.....New 3 Week High, Week Ending October 3rd
-30.....New 3 Month Low in September
-75.....Total Score



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Natural Gas Fund Issues First New Shares Since July

U.S. Natural Gas Fund, the largest exchange traded fund in the fuel, issued 7 million new shares today, the first new units for the ETF since July because of regulatory efforts to limit market speculation. The new shares, worth $79 million, are backed by a total return swap with an investment grade counterparty, the fund said on its Web site. The Alameda, California based ETF, known as UNG, has said it would offer new shares starting Sept. 28 to purchasers who bought creation baskets of 100,000 units, which are then sold on the open market.

“UNG continues to work to re-balance the existing portfolio of natural gas exposure by using a range of suitable investments including listed futures contracts, listed cleared swaps, as well as over the counter total return swaps,” John Hyland, the fund’s chief investment officer, said in an e-mail. The $4 billion fund grew 11 fold since the start of the year to 347.4 million shares outstanding before it ran out in July. The fund backs its shares with natural gas contracts or swaps, and has been unable to expand its fuel holdings on the New York Mercantile Exchange and the Intercontinental Exchange.....Read the entire article

Natural Gas Fund, UNG, Says New Share Creation Tougher Than Expected

The U.S. Natural Gas Fund,UNG,the largest exchange traded fund in the fuel, has found it more difficult than expected to create units using a new process that has purchasers trade natural gas swaps for shares. The Alameda, California based fund has gotten inquiries from market makers and hedge funds, said Jim Stegall, manager of institutional sales for the fund. Many investors prefer swaps of a few weeks or less, while the fund wants six month swaps.

“The vast majority hear that and they don’t want anything to do with that,” Stegall said. The complex swaps for shares creation process may take several weeks, he said.
The $3.9 billion fund grew 11 fold since the start of the year to 347.4 million shares outstanding before it ran out in July. The fund backs its shares with natural gas contracts.....read the entire article

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