Nat-gas prices then surged Thursday afternoon to a 13-year high on reports of a short squeeze as traders scrambled to cover short positions in the February contract (NGG22) that expired Thursday.
The March natural gas contract jumped $.648 or 17.13%. A short is a position betting on lower prices. When prices soar, the shorts have to cover by re-buying positions. The shorts are said to be ‘squeezed’ by the higher prices versus those betting on lower levels.
We recently named Vladimir Putin as the Man of the Year, simply based on what he was trying to accomplish. Half his economy is energy based. Germany is now dependent on Russian natural gas having shut down its nuclear generators. Team Biden begs OPEC to increase output while trying to regulate American producers out of existence.
Crude oil prices took out the old high around $84 and continue to advance. Thursday’s close was up 58 cents to $87.18. The crude oil price has taken out all the highs going back to year 2014. The last high that year was around $105. Any hostile action by Russia could easily accelerate the price back to that level. We have noted the huge option bets on $100 crude oil; the reality of that bet is here now.
All of this makes for a risky trade as price was $10 in April 2020. All technical indicators are extended.
In this space we have warned that the participation or breadth of the stock market has been declining since February, 2021. The percentage of NASD stocks over their 50-day moving averages has fallen to 11%. The result is that the FANG stocks are finally falling. That handful of tech stocks, FB, NFLX, GOOGL, etc. have held up the NASD. That index has fallen from 15,800 in late December to 13,400 (rounded) Thursday. That is a drop of 15%.
The media and various investing sites are urging calm suggesting this is just another ‘correction.’ That is not our view. The current sell-off is not complete. The DJIA jumped 600 points Thursday but closed down 17 points. A lower low lies immediately ahead. That will be followed by a vigorous rally. But watch closely, if the next high is below the levels set by numerous indexes in November, the final signal will be in, the bull market has ended.
Stocks fell seven times as fast as they rose. The potential damage to life savings with more individuals invested in stocks than ever looms large.
On top of all that, the Texas-Mexico border is open, human trafficking is netting drug cartels $100 million a week. There is enough fentanyl coming via ‘undocumented immigrants’ to kill very person in America.
For up to date analysis access https://professorelam.typepad.com/markets/
