Bob Dylan’s song “All Along the Watchtower” states:
“There must be some way out of here,’ said the joker to the thief
“There’s too much confusion, I can’t get no relief”.

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CONCLUSION AND OVERVIEW

Is the major bull trend for NYMEX natural gas (nearest futures continuation) that began in early March 2016 finished? Probably not, though it is a difficult call. In any event, assuming normal weather and moderate United States economic growth, it nevertheless will be very hard for the NYMEX front month price to exceed 12/28/16’s high bordering 4.00 by much (if at all) anytime soon.

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The probable longer run bullish US natural gas inventory situation suggests the likelihood of eventual further moderate rises in NYMEX natural gas prices (nearest futures continuation). The days coverage perspective underlines this, particularly in light of anticipated stockpiles at end October 2017 and thereafter. A comparison of the recent bull move that started in March 2016 to the prior major bull move inaugurated on 4/19/12 at 1.902 offers insight into past and potential trends.

Marketplace history does not necessarily repeat itself, whether entirely, partly, or at all. But all else equal, since 2016’s natural gas rally was less than average in time and (percentage) distance terms, this also indicates the move that commenced in March 2016 probably has more time and price to run. NYMEX natural gas (nearest futures continuation) rallied about 148 percent in about ten months from its 3/4/16 bottom at 1.611 to its 12/28/16 high at 3.994. The distance and duration for eleven major bull moves in NYMEX natural gas (nearest futures continuation) since trading began in 1990 is about 246 percent and twelve months and three weeks.

Some bull voyages took a very long time to complete. For example, the April 2012 to February 2014 advance lasted about twenty-two months and a week. September 2003-December 2005’s flight took 26 months and three weeks; the August 1998 to December 2000 adventure was 28 months.

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However, the move above December 2016’s height may not be substantial and could take at least a few months to occur. Why?

First, US natural gas inventories in days coverage terms at end March 2017, though they likely will slip slightly below those at end March 2013, nevertheless will hover around end March long run averages.

A few major (over 120 percent) bull charges were shorter in extent or briefer in time than 2016’s leap, so an assertion that the 2016 rally ended in December 2016 is not “unreasonable”. Besides, the NYMEX natural gas 26 year trading history is relatively short; compare wheat or the Dow Jones Industrial Average. In any case, one big bull move voyaged up around 123.5 percent, another 129.2pc. For the time horizon parameter, three major bull moves from 1990 to the present were completed quickly. One finished in about two months, another in about three and a half months, and a third in four months. In this context, and although marketplace history is not marketplace destiny, several major peaks in NYMEX natural gas occurred in calendar December, with another one in early January. NYMEX natural gas often attains its major peaks and valleys around the day of the actual nearest futures contract expiration.

The CFTC’s Commitments of Traders reveals a massive net noncommercial long position in the natural gas complex. An elevated net noncommercial position in natural gas has often (but not always) been associated with key marketplace trend changes. The current net noncommercial long position in the petroleum complex likewise is extremely large from the historical standpoint. Both natural gas and petroleum currently are vulnerable to liquidation by the net noncommercial long fraternity, which would tend to pressure prices.

For predicting NYMEX natural gas price trends, monitor those in the petroleum complex. NYMEX crude oil’s 2/11/16 trough at $26.05 (nearest futures continuation) occurred shortly before the NYMEX natural gas bottom on 3/4/16 (and alongside the S+P 500’s 2/11/16 trough at 1810). NYMEX crude oil made important interim lows in its rally, $39.19 on 8/3/16 and $42.20 on 11/14/16; critical interim lows in NYMEX natural gas occurred near in time to these. Remember 8/12/16’s 2.523 and 11/9/16’s 2.546. NYMEX crude oil’s recent high occurred 1/3/17 at $55.24, adjacent in time to 12/28/16’s 3.994 natural gas elevation.

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US Natural Gas- a View of the Past, a Vision of a Future (1-21-17)