2020年11月30日星期一

Think Again About Buying This Commodity

Jeff Clark's Market Minute

Think Again About Buying This Commodity

By Jeff Clark, editor, Market Minute

We’ve likely seen a top in the price of natural gas.

That might seem odd. After all, the weather is just now starting to turn colder. Natural gas usage is likely to increase as we head through the winter. And, all the college economic textbooks say that increased demand leads to increased prices.

But, the real world is different than the textbooks…

In the real world, the market anticipates shifts in demand. Today’s price of natural gas already discounts the expected increase for this coming winter. In other words… we’ve already seen the rally.

Take a look…

The “wintertime” rally in natural gas actually started a few months ago. From the bottom in late June to the top in late October, the price of natural gas jumped more than 100%. But, that rally has ended. For the past few weeks, the price has been falling.

This chart has now made a series of lower highs and lower lows. That’s the definition of a downtrend – which means we’ve probably seen the peak in the price of natural gas.

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Now, it looks like the price of natural gas is going to fall below all of its moving average lines. And, those moving averages look poised to shift to a bearish formation – with the 9-day (red line) and 20-day (green line) EMA's crossing below the 50-day MA (blue line).

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So, we’re likely headed for a few weeks, or maybe a few months, of lower natural gas prices.That’s not too surprising.

After all, we saw the same sort of action last year, and the year before…

To the average person, it seems odd that the price of natural gas would peak prior to the coldest months of the year. But, traders know the market anticipates the shifts in supply and demand. The market discounts the future.

Folks who are thinking about buying natural gas in anticipation of a brutally cold winter should think again. The price is likely to be lower in the months ahead.

Best regards and good trading,

Jeff Clark

Reader Mailbag

What do you think are other economic ideas that could be considered "college economic textbook" for the average person, but don't pan out the same in the real world?

Let us know your thoughts – and any questions you may have – at feedback@jeffclarktrader.com.

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