UNG fail

I've been bullish on UNG on all time frames lately but things are turning sour again in the short term. While a symmetric triangle is typically a continuation pattern (trend is down), it looked as if UNG was forming a base and being long I had hoped that was the case. After the symmetric triangle broke out to the upside, the broader market rolled over and killed that rally, hedges were prudent. UNG now appears to be heading down for a test and I suspect a break of the all time low at $12.69. They call natural gas the widow maker because it kills traders. If we look at UNG from the perspective of how it can kill the most traders I think the way to do it would be a quick and ugly break of that all time low. Volume would surge and possibly big buyers would step in and form the bottom there. So at this point I'm expecting UNG to break to new lows and I'll be watching for a quick reversal. I'm out for now.

Oil Squeeze

CLQ9 August Light Sweet Crude Oil 60 Minute Intraday:

CLQ9 August Light Sweet Crude Oil Daily:

CL#F Continuous Light Sweet Crude Oil Weekly:

Consolidation, now continuous crude oil makes a new high for 2009.

50day moving average: 66.33 *acting support
100day moving average: 84.30 *2nd level of resistance, also lows from Dec 2008. *Target
200day moving average: 74.62 *1st level of resistance

06/08/09 Energy Market Update - Crude Oil & Natural Gas

Stewart Solaka

Past performance is not indicative of future results. The risk of loss in trading futures and options is substantial and such investing is not suitable for all investors. An investor could lose more than the initial investment.

Saturday Rock Blog: Phish and the Boss

Bernanke: Audit us, and we'll crush you

The S&P 500 bounces off a golden cross: Bullish

Tuesday Rock Blog: The Lizards

Hey folks, this was supposed to be last Saturday's rock blog but there seems to have been a big problem with the blogspot network over the weekend. So this scheduled post did not get posted when it was supposed to. Anyways, it was just a video of the best band in the land. I saw a few stellar shows last weekend in the Midwest. It turns out that they played this song (The Lizards) on Saturday night and I was blown away by it to say the least. Phish is back! More details on this great news:

"Amidst a deluge and lightening storms surpassing the intensity of Raleigh ’97, the first real Phish show of the modern era happened at Deer Creek"
Phish Bust Out Rarities, Kids for Unique Father’s Day Gig
Phish energizes sold-out Alpine crowd
This band is back (YEM video clip)
Review: Reunited Phish makes triumphant return
Springsteen Joins Phish to Close Out Electric Bonnaroo 2009

And now back to your regularly scheduled programming: trying to glean a hint of which way the feds are gonna scam this market by analyzing charts. To be honest, I'm getting pretty burnt out following this "anything but free" market. Its become more and more clear that this joke that we called a free market two years ago is just a government funded casino that we all know is gonna collapse but haven't a clue when. After getting back from a very relaxing, distracting and sun filled vacation, here are some of the headlines I ran into that jolted me back to reality:

"Uhhhhh.... Ben? (Blatantly Unlawful Acts?)"
Chicago Eyesore: Construction halted at 26/90 stories
Commercial real-estate prices fell 8.6% in April
"A number of banks" Suspend TARP Dividends
Goldman to make record bonus payout
Insider Selling Outpaces Buying By 22x

Peter Schiff: "The American financial system imploded for two reasons: cheap money and moral hazard - both of which were supplied by the government. Under the proposed new regulatory structures, these toxic ingredients will be combined in ever-increasing quantities."

Joke of the day: President Obama said Tuesday that Federal Reserve Chairman Ben Bernanke had done a good job handling the financial crisis

Saturday Rock Blog: Summertime Blues

Natural Gas Pair Trades

Here's just a quick post before I take off for a two week long vacation. As you know, I think natural gas is forming an important bottom here. While it could go lower, I could also see it going much higher in the short term. In the long run, it seems impossible for natural gas to not rise.

That being said, I am nervous. I am nervous that the stock market will crash any day and if it does it will take commodities down with it. I'm also nervous that there are way to many traders jumping on the natural gas bandwagon before a clear sign of higher highs, they could get wiped out on a renewed and accelerated decline. I am nervous about the open interest in UNG calls and the building natural gas stockpiles. I don't want to be short, but I'd like a hedge. The two that make sense to me are natural gas producer stocks and solar stocks. Both of those sectors have shot up huge in advance of natural gas prices of which their industry completely depends. So shorting either FCG (nat gas producer etf) or TAN (solar stock etf) to hedge a long position in UNG seems prudent.

Here are the charts for shorting FCG or TAN whist long UNG. In both cases there is a long way back to the "mean value." With both you could "own these charts" by being short one share of FCG or TAN for every share of UNG long. In both cases I could see these trades doubling by Fall in a "mean reversion."

See you in a few weeks!

Disclosure: I own UNG calls.

Peter Schiff on The Daily Show

Edit: Viacom blocked it, but you can prob find it on the Daily Show website. Enjoy him on CNBC instead:

06/08/09 Energy Market Update - Crude Oil & Natural Gas

Gold/Crude Oil Continuous Monthly:

Past performance is not indicative of future results.

The Gold/Crude Oil ratio above shows how many contracts of crude oil it takes to buy one contract of gold. Notice after it reached resistance levels from 1989; back on 03/06/09 the ratio neared 22. Then, it took 21.8 contracts of crude oil to buy one contract of gold. This brought the question, "Would we see gold move lower or crude move higher, or neitheir?" So far, we have seen gold move from the close of 942.7 on 03/06/09 to a high of 962.6 on June 5th, 2009, a 2.1% gain, and crude oil move from the close of 45.52 on 03/06/09 to a high of 68.44 June 5th, 2009, a 50.3% gain. Clearly, the move in crude oil has been stronger and oil moved higher to gain ground against gold, pulling the ratio down to 14.1.

Now that the ratio is trading back under 15, the question will be, "Will we see crude oil continue to move in this direction?"

15.0: Support?

Continuous Front Month Light Sweet Crude Oil Weekly:

Past performance is not indicative of future results.

Looking at the weekly chart above, you see the inverted head and shoulders formation set between December and March. After breaking the downtrend from the highs of last year in February, oil broke above the neckline of $50.00. Then, many received their 'confirmation' to finally go long. This ended up testing the patience of the longs as oil pulled in to test the $40-45 support level, by making a low of $45.44 during the week of April 24, 2009. However, holding it's first tier of support ($45). As this level held and the market pushed higher, we have now seen a squeeze and a breakout with prices touching off a high of $70.32 on June 5th, 2009.

Remember the fundamentals in February were not great, in fact they were bearish. It was the technicals that gave a potential trade setup and a buy in crude oil, now that the market is 75% higher, "Are the fundamentals any better?" Technical analysis works!

The 70's will be dicey as the market brings in many levels of resistance, and new sellers start coming into the market. The 70's also bring the 50day, 100day, 200day moving averages, and a 38.2% retracement from the highs of last July to the lows of January 16, 2009. As the fight between the bulls and bears emerges here, look for consolidation for the market to find direction.

Continuous Front Month Light Sweet Crude Oil Monthly:

Past performance is not indicative of future results.

The monthly chart above has done exactly what we were looking for the market to do back in our article "Does Black Gold Have Any Luster In The Near Future" on February 22, 2009.

Longs in near $40, and longs who added on the break above $50 have significant paper gains. Seeing a $30.29 or 75.66% gain since February 22. One never wants to give back what the market has given, and in the same sense, one should not let go of a winner to easily! So, "What to do?" Protect gains, raise stops, use targets, and stay patient. Bulls look for a target of $85.00-$90.00.

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Continuous Front Month Natural Gas Monthly:

Past performance is not indicative of future results.

Looking at the long term natural gas monthly chart above, see that the market pulled to the trend line dating back from 1999 to 2002 lows. Similiar to the crude oil monthly, except the market is lagging crude oil. One thing concerning from the chart above is that the market has not completely touched the trendline as oil did a few times. This market is trying to form a base, and many people are jumping on the ship anticipating the bottom. However, it will not happen overnight (just as crude oil's base did not) and 'many' people will not make money. The market passes money to the few not to the many. The time that passes as natural gas trys to form this base will errode and unnerve longs in the market, in my opinion.

For specific trade strategies please feel free to call me at 888-325-9300 or email ssolaka@lasallefuturesgroup.com.

Continuous Front Month Natural Gas Weekly:

Past performance is not indicative of future results.

Notice a clear break from the downtrend. The market quickly rallied before finding strong resistance at $4.50. Also, notice that it pulled back to find support at $3.50. I see a bull flag here. The market will need to break above $4.50 to attract confirmation buyers standing on the sidelines.

US Dollar Index : Natural Gas Daily:

Past performance is not indicative of future results.

Now, we look at the relationship of Natural gas into the US Dollar Index. Daily shows a potential topping formation, indicating potential strength in Natural Gas to come.

I apologize that it has been some time since my last post. Things have been really busy (which is a good thing!) but my clients as well as people who follow me have been receiving emails and market updates more frequently.

For questions or to receive market updates, send email to ssolaka@lasallefuturesgroup.com.

Thank you and best of luck trading!

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS IS SUBSTANTIAL AND SUCH INVESTING IS NOT SUITABLE FOR ALL INVESTORS. AN INVESTOR COULD LOSE MORE THAN THE INITIAL INVESTMENT.

Sunday Viewing: Mish @ Google

Saturday Rock Blog: Kids

Natural gas is forming a major bottom (UNG)

I think its time to sell crude and buy natural gas in size. I love yesterday's inverted hammer candle on record UNG volume. Set stops at the lows!

Disclosure: I own UNG calls

Breakout!

I've got the Russell 2000 ETF IWM above but all major indexes have broken their series of higher highs with the recent gains. On the IWM I see a massive inverted H&S that targets something like 35% higher. Now that prices are above the 200 dma, this 200 day moving average may start to flatten out and even start rising. Once that happens the stock market will by most measures be in a long term uptrend. Bear market over. However, Volume has been extremely light this entire year, especially so recently. Ultra narrow Bolllinger Bands have precluded every major drop for over a year now. So while the markets are looking techinically very bullish I would beware the false breakout. But we'll see, the benfit of the doubt goes to the bulls here. I'll be trying longs with a stop around $52, then get agressively short if IWM loses $51.7.

How Bernanke Rules the World (staying on the DL)

"On September 15,2008, Merrill Lynch entered into a merger agreement with Bank of America. The merger was negotiated and due diligence was conducted over the course of a tumultuous September 13-14 weekend. Time was of the essence for Merrill Lynch, as the company was not likely to survive the following week without a merger. The merger was approved by shareholders on December 5, 2008, and became effective on January 1,2009."

"The week after the shareholder vote -and days after Merrill Lynch set its bonuses Merrill Lynch quickly and quietly booked billions of dollars of additional losses. Merrill Lynch's fourth quarter 2008 losses turned out to be $7 billion worse than it had projected prior to the merger vote and finalizing its bonuses. These additional losses, some of which had become known to Bank of America executives prior to the merger vote, were not disclosed to shareholders until mid-January 2009, two weeks after the merger had closed on January 1,2009.

On Sunday, December 14,2008, Bank of America's CFO advised Ken Lewis, Bank of America's CEO, that Merrill Lynch's financial condition had seriously deteriorated at an alarming rate. Indeed, Lewis was advised that Merrill Lynch had lost several billion dollars since December 8, 2008. In six days, Merrill Lynch's projected fourth quarter losses skyrocketed from $9 billion to $12 billion, and fourth quarter losses ultimately exceeded $15 billion.

Immediately after learning on December 14,2008 of what Lewis described as the "staggering amount of deterioration" at Merrill Lynch, Lewis conferred with counsel to determine if Bank of America had grounds to rescind the merger agreement by using a clause that allowed Bank of America to exit the deal if a material adverse event ("MAC") occurred."

"Bank of America's attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and Board would be replaced."

"Despite the fact that Bank of America had determined that Merrill Lynch's financial condition was so grave that it justified termination of the deal pursuant to the MAC clause, Bank of America did not publicly disclose Merrill Lynch's devastating losses or the impact it would have on the merger. Nor did Bank of America disclose that it had been prepared to invoke the MAC clause and would have done so but for the intervention of the Treasury Department and the Federal Reserve.

Prior to the closing of the deal, Lewis had requested that the government provide a written agreement to provide additional TARP funding before the close of the Merrill Lynch/Bank of America merger. Secretary Paulson advised Lewis that a written agreement could not be provided without disclosure."

"On the issue of terminating management and the Board, Secretary Paulson indicated that he told Lewis that if Bank of America were to back out of the Merrill Lynch deal, the government either could or would remove the Board and management."

"Secretary Paulson's threat swayed Lewis. According to Secretary Paulson, after he stated that the management and the Board could be removed, Lewis replied, "that makes it simple. Let's deescalate." Lewis admits that Secretary Paulson's threat changed his mind about invoking that MAC clause and terminating the deal.

Secretary Paulson has informed us that he made the threat at the request of Chairman Bernanke. After the threat, the conversation between Secretary Paulson and Lewis turned to receiving additional government assistance in light of the staggering Merrill Lynch losses."

"It also bears noting that while no public disclosures were made by Bank of America, Lewis admitted that Bank of America's decision not to invoke the MAC clause harmed any shareholder with less than a three year time-horizon."

"Secretary Paulson informed this Office that he did not keep the SEC Chairman in the loop during the discussions and negotiations with Bank of America in December 2008."

So it turns out BAC is not quite as dumb as we all thought! The BAC management and board didn't want to go through with the merger, THEY WERE FORCED TO by Bernanke. The threat of loosing your job and your company is enough to get people to break SEC regulations and federal law, apparently. Will Paulson go to jail over this? Probably not, especially with Bernanke still running the show. But someone's head has got to roll and I'd bet they want it to be Lewis (he's still CEO remember). I got these from interesting quotes out of a recent letter from Andrew Cuomo to heads of the legislature.

Natural Gas Cup n Handle (30 min time frame)

Here's a nice looking cup n' handle on July natural gas I ran into today. This pattern is normally a continuation of an already existing up trend. In this case, that up trend began last week at $3.50 and the pattern targets $4.40. Click here for more examples of this pattern. Good luck!

disclosure: I own UNG calls