Nat gas (UNG) has recently caught my attention. While it was in a significant downtrend for the better part of a year it has recently been consolidating right under the $20 level. A look at the daily chart shows a long move down and then recently a sideways consolidation pattern. While this is typically a continuation pattern I am beginning to believe think that the next move may be up rather than an extension of the previous down trend.
Natural gas staged an impressive reversal this morning. Chesapeake Energy Corporation (NYSE:CHK) said they would shut down some of their natural gas production based on the current price of the commodity. This is a clear indication that natural gas has reached a bottom. Why? Because traders now have a firm price level where companies are going to cease natural gas exploration and production.
The stock markets are flat today after mixed data across the globe. Overnight, China gave the futures a push after reports showed inflation cooled slightly. The consumer price index rose 4.1% in December in China. Overnight, the Dow Futures had been higher by over 100 points. This morning the ECB disappointed the markets when they held interest rates at 1%.
Yesterday, the markets surged higher hitting the key SPDR S&P 500 ETF (NYSEARCA:SPY) $129.50 level. This resistance level was solid and sure enough the markets are pausing today. Volume remains amazingly light in this new year. In addition, even with a strong Dollar the indexes have continued to hold near their multi month highs.
After some early selling, the markets have floated back to the positive side. This is not surprising as light volume plays a key role in an up market. In addition, the S&P 500 broke out of a triangular range yesterday. This means further upside in the next week is likely. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $127.58, +0.09 (+0.07%). The action today is known as consolidation.
$100 Oil Will Eventually Hurt The U.S. Economy Again
WTI oil has now traded above $90.00 a barrel since late October 2011. While high energy prices used to signal global economic demand and strength; it is still a direct tax on consumers. These days high oil is affected by geopolitical events, weather, and the obvious action in the U.S. Dollar Index.
Yesterday, an article was published from yours truly discussing the recent massive move up in oil. The United States Oil Fund LP (ETF) (NYSEARCA:USO) had jumped over 30% in the last six weeks. The article discussed how money flow would start to cycle away from oil as the easy money had already been made and focus on natural gas and alternate energy like beaten down solar stocks.