Chart of the Day -- Performance of Gold, Nat-Gas, Solar, Oil and More

Here's a chart of what's working, and what's not, using a performance chart. I would put platinum on the chart, but its recent performance is indistinguishable from gold. Silver was doing better in September and October, but over this time frame, its performance tracks palladium.

(Updated chart)

See my analysis on natural gas from earlier this week.

Good luck out there.

An Earth-Shattering Ka-Boom in Shale Gas Production

Just look at the surge in dry gas production from the shale gas deposits.

Source

And here's the total US nat-gas production ...

I made the chart using data from here: http://www.eia.gov/dnav/ng/hist/n9050us2M.htm

Charts of Gold, Dollar, Natural Gas and More

Here's an interesting factoid from Bloomberg: 

Holdings in gold-backed exchange-traded products increased for a fourth day yesterday, rising 0.1 metric ton to 1,876.7 tons, data compiled by Bloomberg show. Assets reached 1,874.9 tons on Nov. 5, the lowest since April 2010.

So even though gold prices are trending lower, we seem to have hit a bottom in holdings in the GLD and other ETPs. I think that's REALLY interesting.

(Updated chart)

Yesterday, gold cracked support at $1,268 -- October's closing low. It is bouncing this morning, but not much (so far). If gold breaks support level 1, it should test its last real support at the Oct. 15 intraday low of $1,251. Beyond that it looks like a pretty straight shot down to the $1,200 level. 

I would expect $1,200 to hold on a closing basis.  But that test could be scary. It could also be one hell of a buying opportunity.

And this is happening against a backdrop of what appears to be a bottom in physical holdings in the GLD and other ETPs.

One more puzzling thing:  Last week, I got strong buy signals on select gold miners. Sure, those signals could be wrong. But I'm more inclined to think those signals are just early. In that case, I would add to those positions at lower prices.

But where will those lower prices be? As the saying goes, the best place to pick tops and bottoms is on Miami's South Beach.

China Slowdown?

One of the things driving gold is fear of a slowdown in the China economy (because China is such a huge buyer of gold). There is some fear that Chinese authorities may cut their GDP growth target to 7% from 7.5% this year. So that's a bearish force on gold, in my opinion.

But judging from recent reports of purchases of iron ore, copper, grains and more in China, it's NOT slowing down. Those fears may be misplaced.

We can talk buying by the exchange-traded funds and China all day, but what really seems to be pushing gold lower is strength in the US dollar. The dollar rose against all major currencies yesterday, though the US dollar Index settled the day nearly unchanged. It's testing overhead resistance. What happens next?

(Updated chart)

The US dollar is looking strong. That's partly due to an improving US economy. However, I also think the broad US stock indices hit a short-term overbought condition, and now traders are grabbing gains, and in effect, using stocks to buy US dollars.

So that's hard to read in the short term

A strong US dollar generally weighs on commodities.  One commodity is going against the trend, however ...

(Updated chart)

What causes this? In a word, "snow." It has become a trend recently for natgas to make a weather-driven rally but then fail to hold onto gains. So, as weather warms back up later this week, look for prices to come back in.

If prices DON'T pull back when the sun comes out, we may be looking at a potential breakout in natural gas.  This breakout could come from an inverse head-and-shoulders pattern, but it's too soon to tell. If it does happen, it would give us a target of $4.80 or so on natural gas. That would be quite a move, so stay tuned.

All this said, my best idea in natural resources is something else. I'm saving that for my Gold & Resource Trader subscribers in an update later this week.

Other interesting reads:

• The S&P 500 has spent a year above its 200-day moving average.
• 10 Requirements for a stock market bubble.
• Swimming in crude oil: Over the next three years, the Gulf of Mexico is poised to deliver a slug of more than 700,000 barrels per day of new crude.
• Sales of American Eagle silver coins by the U.S. Mint since the start of the year surpassed the annual record as the futures market rallied from the lowest in 34 months.

Good luck and good trades today.

Natural Gas Looks Poised for Breakout

Remember back on October 1 when I asked "is natural gas about to make a move?"  Well, check out the chart through Tuesday's close ...

(Updated chart)

You can see that natgas broke that downtrend, just as I expected. Now, it is flirting with the neckline of an inverse head-and-shoulders pattern.  If it moves above that successfully, the minimum target becomes $4.28.

The natural winners in this scenario are those companies that are leveraged to natural gas. Specifically, I would look for companies that have very poor economics below $3.50, and that make a profit above $4.25.

This chart is only through last night's close. Today, natgas is down slightly, at $3.69. You can wait for the breakout or not, depending on your stomach for risk and your appetite for reward.  

Personally, I can't wait until my new publication starts next month. I'm itching to make new recommendations.

Just remember that success is never guaranteed. Do your own due diligence before buying anything.

Is Natural Gas About to Make a Move?

Natural gas has been under pressure all during the month of September for a number of factors, including ...

• 2013′s hurricane season has been one of the mildest in recent memory.
• Demand and consumption  of natural gas are heavily tied to heating and cooling across the country. The summer was mild and autumn (so far) is temperate. Homes do not have much use for cooling or heating, driving down demand and driving stockpiles higher.
• And that brings us to point #3, less demand means bigger builds in nat-gas storage. The most recent EIA Natural Gas Storage report indicated a rise of 87 bcf from the week prior.  It is still within the 5-year range, however.

Add it all up, and the United States Natural Gas Fund (UNG) has seen outflows of $21 million since the beginning of the September, compared with the inflows of over $120 million from June to August.

But I think traders have priced in too much bearishness.  Take a look at this chart of the natural gas future ...

You can see that natural gas is still banging its head on a downtrend that's been in place for months. However, bullish volume is rising and stronger than bearish volume.

The price action does not line up with a broad sell-off, which would see us revisit the August lows.

I think the strong hands are remaining tight, and keeping their hands close to their vest.  It seems to me the odds favor another retest of that overhead resistance, and a possible breakout.

We'll see how it goes.