Natural Gas Sunday
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Started by metmike - Nov. 11, 2018, 5:58 p.m.

Higher open

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By metmike - Nov. 11, 2018, 6:04 p.m.
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Got the higher open.


Massive disparity in the models.

By WxFollower - Nov. 11, 2018, 8:22 p.m.
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Mike,

 Per both Truewx HDDs on a day by day comparison and considering the colder Radiant Sun forecast, the higher open makes sense.

By metmike - Nov. 11, 2018, 10:11 p.m.
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Agree Larry,

https://www.marketforum.com/forum/topic/17084/


Note the colder Canadian ensemble solutions late in week 2 and the big downward shift in the NAO and AO.

As well as the stronger cold front towards the end of this work week. 


By metmike - Nov. 12, 2018, 4:53 p.m.
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The natural gas market is featuring the wildest trading in well over a decade.

We opened higher last evening from colder weather forecasts, then spiked higher overnight.

There were several elements to the colder forecasts. 


See here for more details:

https://www.marketforum.com/forum/topic/17128/

The morning weather models were actually milder, mainly the GFS and European models, which put pressure on prices.

The NWS 8-14 day outlook looks mild.............but they rated it a 1 out of 5 in confidence. I don't remember the last time it was that low. 

However, the Canadian model, which has been leading the way with colder changes, continues to advertise the potential for extreme cold returning by the end of week 2.


With both the AO and NAO plunging during week 2, the set up for extreme cold returning is excellent.  I am solidly in agreement with the Canadian model on this. 


The market obviously is too. If it believed the NWS 8-14 day outlook we would not be this strong.

Also, the week 3+ CFS forecasts have turned sharply colder. As Larry has noted, this product does not display much skill but its likely adding some additional bullish fuel to the ng fire right now.


By metmike - Nov. 12, 2018, 5:01 p.m.
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Nat gas is usually fairly quiet after the 1:30pm daytime close but has roared higher by $1,500/contract in setting new contract highs in the last 2.5 hours.


If the extended models keep getting colder, how high will we go?


Its getting so wild that the concern is more about trying not to lose a ton of money(in my small account) real fast on a knee jerk reaction..............that reverses quickly.



By WxFollower - Nov. 12, 2018, 5:14 p.m.
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 The 12Z Euro ensemble is colder than the 0Z, which itself was much colder than yesterday's 12Z. This is imo what's the main driver for the late rise to new highs after the 12Z GFS suite seemed to bring it down to near session lows earlier. The market tends to go with the Euro ensemble more than with the GEFS because of its higher skill. It doesn't typically do too much with the CDN ensemble due to its lower skill though I've found it can be a tiebreaker of sorts sometimes.

By WxFollower - Nov. 12, 2018, 5:44 p.m.
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 I find NG to be pretty unique in that it tends to not be as heavily affected by the stock markets as many other commodities like CT. One reason may be because people are going to use AC and heat regardless of their financial strength. However, I'd think some would turn their AC temp up and/or heat temp down to save some. Also, wouldn't industrial demand be tied to the economy to some extent?

By metmike - Nov. 12, 2018, 5:58 p.m.
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Yes, it really was just the 12z GFS operational model that was quite a bit warmer not the Euro that i threw in there.

The overnight Euro ensembles, as you noted were MUCH colder but the market didn't react much for several hours after it came out. 

The 12z run of the Euro ensembles was a bit colder yet as you also noted. I thought the change was not anything that we don't see on almost every model run(or even bigger) but in this environment, little changes are of bigger importance.


Still think the -AO and -NAO and very cold Canadian model pattern(not just the HDD's but the pattern) are the most bullish elements going right now.

The 18z GFS is not nearly as warm as the 12z run for week 2. It went from the warmest to one of the coldest for several of the days in that period.



By WxFollower - Nov. 12, 2018, 6:22 p.m.
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Mike,

 I do see about a 3 penny pop on the time and sales from around the time the Euro ens started (1 AM CST) to the time it ended (2 AM CST). But we need to keep in mind that many are asleep then and don't make their trades til 4-5+ hours later, which is when volume rose and it really got going. Also, the Radiant and other forecasts don't come for several hours afterward. We need to remember that most traders can't read models, themselves, and many wait for the forecast to be released.

By metmike - Nov. 12, 2018, 6:42 p.m.
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This is true Larry.


Though the difference between the low, when the Euro ensembles started coming out and the high(which actually was hit  when they were probably a bit over halfway out) was just over 3c, we traded in that same range(to just a bit higher than that) until just after 5:40 pm, which was more than 3.5 hours after the European ensembles were completely out. That's when we broke out decisively.

Probably just as you said, alot of the bigger traders getting their forecasts and putting on positions then. 


Am not disagreeing with anything you say, just noting(including for my own benefit)  these times with respect to the when the much colder European ensembles came out.

There have been numerous times, that overnight I see a big change in the models and am disappointed for hours at the seemingly muted reaction(like this one we are referring to) then pretty exhausted, put in a tight stop while trying to get a couple of hours of sleep, only find, upon waking, that the market has made a powerful move in the expected direction..................after hitting the stop. 




By metmike - Nov. 12, 2018, 6:50 p.m.
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The GFS ensembles for the 18z run look a bit milder to me in the week 2 period..

I am hesitant to even say this in such a crazy ng market but this would be a great shorting set up if the models all turned milder overnight.

You don't want to be short if they turn colder but we have dialed in some hefty price risk premium up here near $4 and things always look the most bullish near the top.

That being said, my outlook from earlier has not changed. Much colder than the last NWS outlook. With a plunging AO and NAO, I  would never be short, absent a big model turn around to warm overnight. 


I was also amazed at the massive trading volume after the day time close..... when its almost always quiet.

When we were making new highs, thousands of contracts were being traded in short periods of time(several minutes).

This could be panic type buying from huge shorts or at least them finally crying uncle  based on being short from much lower levels with the expectation of  massive supply fundamentals pressing ng prices much lower. 

I will guess that alot of fuel on the strongest days has been short covering from this group. 


By WxFollower - Nov. 12, 2018, 8:55 p.m.
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Mike,

 Trading NG in this pretty one-sided panicky environment (persistently bullish due to low storage) is certainly not easy. I’d say the same when it is the opposite (persistently bearish due to whatever reasons). I think it is less difficult when it is more two-sided. What do you think? It almost seems as if there’s one or just a couple of large entities doing this at a time but who knows? I’ve talked to you about this before. Maybe there was one big fund buying/short-covering then?

  Also, I think a lot of action in recent years has been controlled by algorithms rather than direct human decisions. Do you agree? Have you ever noticed when placing a bid or offer in any market an instaneous higher bid or lower offer is sometimes placed? That has to be machine rather than human. You didn’t have that in the pit days.


 Regarding your late night frustration, I don’t know what to recommend and it is hard to predict what will happen during any given night, but I have ideas that may help you. Since it hasn’t worked well, what about not staying up so late thereby allowing for good sleep, waking up a little early (maybe just before the main forecasts are released and before the higher volume gets going), seeing if the overnight models show a good consensus change, seeing if NG still hasn’t reacted too much to that change yet, and only then possibly putting on a position. You may not get in as often but hopefully you’ll get better sleep as well as have a better % record. Keep good records so you can analyze what works better. Another consideration is to put on only a small enough position to allow for a wider stop when you’re asleep. Another possibility is buying OOM option before bed. Do you ever do that? Admittedly, the problem with those is the lack of liquidity/volume at night.

Edit/aside: Why wasn’t the market concerned during summer about low storage for the winter? Prices stayed low then. Why suddenly is it concerned now? It doesn’t make much sense to me. Really strange and makes me wonder what’s going on.

 Here’s a great article on the subject:


https://seekingalpha.com/article/4221312-natural-gas-analytics-latest-price-action-proves-market-inefficient