The Labor Day weekend traditionally marks the onset of the football season, when we start to anticipate a change in seasons, as crisp, autumn-like temperatures begin to fill the air. Yet, this is not the only seasonal change we can expect. Natural gas futures (NGV25) traders are beginning to shift their focus from current market conditions and turning their attention to the upcoming winter season.
This translates to rising futures pricing models, which look forward to winter contract months, such as November through March. This impetus typically coincides with a bottoming of natural gas futures prices around the last week of August to the first week of September.
This year is no different, after a summer where production has outpaced demand, causing spot prices to fall precipitously. Recent market price action is starting to exhibit a bottoming cycle, as indicated by a positive price divergence in the Relative Strength Index (RSI), and corresponding with two lows (a double bottom) off the outer lower Bollinger Band.
The mean reversion crossover and rising RSI are positive indications of continued upward price appreciation. However, Barchart’s TrendSeeker is still signaling a downtrend, which serves as a cautionary tale to this price recovery.
But, just as Sea & Surf shops put flip-flops and T-shirts on sale at the end of the beach season, so does the natural gas market discount end-of-summer prices. Soon, we will be exchanging beach blankets and swimsuits for sweaters and corduroy, while natural gas will be substituting summer for winter prices.
– John Rowland, CMT, is Barchart’s Senior Market Strategist and host of Market of Close.
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
