Germany is closing its six remaining nuclear plants, increasing its dependence on Russian natural gas.
And that is the best news the US Energy Industry could have. Natural gas future prices bottomed in the summer of 2020 around $1.60. Since then price has completed a four wave Elliott advance. The high was just over $6.25 this fall. A fourth wave correction drew pries to the August low around $3.75. The demand from Europe and the Far East will likely drive prices to new highs this winter. Price jumped 2.77% Wednesday to close at $3.98. That is likely the kick off to a fifth wave of new high prices. UNG is an ETF holding 48% of its assets in natural gas future contracts. This makes it a direct play on the gas price, not the stock of gas producers. It jumped 1.68% to $12.72 Wednesday. Full disclosure, I own and plan to buy more UNG.
While LNG is selling for $4 here it is already $60 in Europe and $45 in Southern Asia. Venture Global LNG signed an export deal with China National Offshore for 21 million tons of LNG along with another 1.5 million. Arbitrage is the process of taking advantage of price disparities in different markets for the same product. That means buying gas here for $4 and selling it in Europe for $60.
Crude oil is also moving up. Its correction took price from $84 to a low of $62 on the same warm weather news in the Northeast. Now it has rebounded to $72.76. There are huge bets via options that price will eventually hit $100 again. With so many coal fired and nuclear plants closed, that could happen.
Goldman Sachs GS confirmed out warnings that the breadth of stocks participating in the 2021 rally have been crumbling. GS states five stocks in the S&P 500 have accounted for more than half the rally since April. But the prices of those FANG stocks in the tech area have been sliding. The symbol in stockcharts.com is $NYFANG. That index has fallen from 8,000 to 7,000 but looks poised to rally into January. The percent of NASD stocks over their 50-day moving average bottomed at 147.5% and has now risen to 25.75%. Again, the rally begins.
Our guess is that stock indexes will peak in the first quarter of 2022. Long term patterns, lack of breadth, inflation, and Team Biden’s low poll numbers, will begin weighing on the market.
