Thursday, June 3, 2010
6/4/10 Natty Gas
Looking out on the morning rain
I used to feel uninspired
And when I knew I had to face another day
Lord it made me feel so tired
Before the latest E-I-A life was so unkind
Now it's the key to my peace of mind
'Cause U-N-G feels U-N-G feels
U-N-G feels like a natural winner
Congratulations, David! It takes a true believer to hold UNG through the kind of adolescence it's had the past several months.
Enjoy your time in Laguna Beach.
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Thank you, 2nd_ave!
ReplyDeleteAs I recall David, you were negative on UNG as being representative of the price of NG, issues of contango and other problems such as the need to issue additional shares. That was on the other blog some time ago. Now, I see you have embraced UNG as a trading vehicle, very successfully. Can you share any thing about what changed your mind, if indeed it did change?
ReplyDeleteNote: I did not catch on to this blog until fairly recently.
Re my comments last night about TIPS- Here's a breakdown of Hussman's holdings in his Strategic Total Return Fund:
ReplyDelete"In bonds, the Market Climate remained characterized by moderately unfavorable yield levels and relatively neutral yield pressures. The Strategic Total Return Fund remained positioned largely in Treasury Inflation Protected Securities, with about 25% of assets allocated between precious metals shares, foreign currencies, and utility shares. The recent enthusiasm of investors about recovery prospects has coincided with a retreat in the demand for risk hedges such as precious metals. Meanwhile, the U.S. dollar has advanced somewhat, which has pressured gold a bit. Apart from those shorter-term dynamics, however, the U.S. dollar continues to be vulnerable in the face of massive monetization and the likelihood of a longer period of economic weakness than investors may be envisioning. Our overall investment position remains generally conservative, but is biased toward performing better in an environment of dollar weakness and pressure on U.S. real interest rates, which is consistent with the larger economic picture."
If I had any conviction other than that they are printing money like it was confetti, so eventually it must be worth less, I'd have been shaken out, long or short. The market goes this way and that, greed or panic, depending on the direction of the wind almost, till the boat flops over so hard, that the keel pops it up going the other way again. Honestly, valuations are only based on finding a bigger sucker to buy the shares vs noplace else to put the money that can make money.
ReplyDeleteJust daytrading, goal $500 a day, still. Up $1950 today, a better day than most. Playing the 1 min and 5 min charts with 5% of cash position and being oblivious to the world is as safe and profitable as anything these days, IMO.
Glad to see you checking in Cheapy....Was about to send out the recon team. You can make the trip to David's and TOF's right? After packing the car, all I have to due is hook-up the towable Party Bar, and we're off and running.
ReplyDeleteHussman on gold - That's all well and good, but does nothing to explain why gold wasn't the safe haven when Bear Stearns, etc. were doing their belly flop.
ReplyDeleteCome to think of it also doesn't do much to explain why gold was until recently flying along with equities and the U$D.
Obviously the velocity of money is a target for the FED, so they are no doubt willing to sacrifice the dollar. They have announced this numerous times... It's a balancing act, the U$D being the world's reserve currency is extremely resilient and when fear begins to grow becomes the defacto shelter due to it's immense liquidity. So if things begin to get out of hand and the dollar begins to weaken at a concerning rate, all the FED must do is create a little fear and maybe pull a few strings. I don't think this has happened yet, the eurozone has done this for them.
As far as the ebb and flow of currencies is concerned, I suspect we're being played b/c the pieces never seem to really move in unison.
Still on my diet. Not much drinking other than water, milk or juice, here, LOL.
ReplyDeleteMaybe SOMEDAY I'll get the weight down to where I can have a small one each evening... It would be a good goal...
It was a deleveraging panic where EVERY fund sold EVERYTHING they could sell, including gold, IMO.
ReplyDeletePeople were still thinking of US dollars as real money, then. Lets see if OB, TurbotaxcheatTimmy and the Fed don't change that within the next few years. Right now, nobody is noticing the cancer in Washington because the rest of the world looks ugly because they are printing more honest data. I think eventually they will notice the emperor has no clothes.
Cheapy- That's a good point. My question is, and has been, who the hell is leveraged to the max now? I don't see it...at least in the market. Where are the forced redemptions going to come from? I remember those last year like a re-accuring nightmare.
ReplyDeleteFrankly, the quants are running the show right now and simply trading off support/resistance. Look at today, hit the 200, sell off, rebound, sell off. It should be working really well for those who can do it all day.
ReplyDeleteI heard the banks are still lending 10 to 1 to the hedge funds. Is money worth nothing at all?
ReplyDeleteUNBELIEVEABLE!
They learned absolutely nothing because they don't give a shit what happens when the force the hedge funds to sell out.
re: quants
ReplyDeleteYeah, but the liquidity will evaporate very quickly at the first sign of trouble, till they see complete panic and a good bottom test. In the meantime, we all will take our money to the sidelines.
That's what happened in the flash crash, IMO. Things dropped to where real willing buyer/holders were willing to take a chance putting their money on the line.
anyone listen to the fleckenstein interview linked up to on CC? it's a great interview.
ReplyDelete"My question is, and has been, who the hell is leveraged to the max now?"
ReplyDeleteMark, I recall reading a couple of months ago that the total margin debt in US accounts was close to its 2007 max. It would be interesting to find a historical chart of it and some source of daily or weekly updates.
yeah, I agree with Fletch. Anyone who didn't warn of the r/e bubble should now be ignored.
ReplyDelete"Come to think of it also doesn't do much to explain why gold was until recently flying along with equities and the U$D."
ReplyDeleteCP, I think the reason is simple: $USD was not really rising much against other currencies -- it was simply the Euro that was dropping (which is the biggest component in the $USD index). And the panic in Europe made the wealthy people there seek alternatives to their holdings of Euros and Euro debt, with gold+USD being the obvious alternative to the former and US Treasuries being the obvious alternative to the latter. That's why, I think, all 3 of them rallied like crazy in May.
Illini, I posted a number of times on this blog over the past month that I was really concerned about the NG storage being at the same levels as last year, and hence the possibility of storage overfilling and a huge contango eating up 1/3 of UNG permanently over the course of September, October and November, just like it happened last year. I think that's why Nat Gas futures were dropping below $4 several times over the past 2 months (even though the total production cost for vertical rigs is about $6, and these rigs form the marginal supply which, if eliminated, will create a real supply crunch). All I hoped for while scaling into UNG in February was one good rally during the Summer (based on air conditioning demand, hurricane fears, etc.), which would allow me to unload my UNG with profit before it comes face to face with heavy contango in October. Once the current rally rolls over, I will start scaling into UNG once again ONLY if the supply level will be noticeably below that of last year.
ReplyDeleteFutes negative ahead of jobs. DJIA -80, SPX -8...
ReplyDeleteIf they remain ugly after 530 pst, then I think we sell off hard into the weekend.
ReplyDeleteI haven't had drink in over 2 weeks...think I could use one?
ReplyDelete"Hiring weak in May except for Census workers-
ReplyDeleteWASHINGTON (MarketWatch) - U.S. nonfarm payrolls expanded by a seasonally adjusted 431,000 in May, but virtually all the new jobs were temporary jobs at the U.S. Census, leaving private-sector hiring very weak in May, the Labor Department reported Friday. Excluding 411,000 temporary Census workers, payrolls rose by 20,000 in May. According to the survey of 400,000 business establishments, private-sector payrolls increased by 41,000, the fifth straight gain. The unemployment rate fell to a seasonally adjusted 9.7% in May from 9.9% in April, according to a separate survey of 60,000 households. The decline wasn't particularly good news, however, because the drop was due to 322,000 people dropping out of the labor force."
Looks ugly.
ReplyDeleteDJIA -174...
ReplyDeleteDJIA -200
ReplyDeleteSPX -24...
ReplyDeleteSettling down around DJIA/SPX -170/-21...
ReplyDeleteVacation? I can't go....
ReplyDeletehttp://www.youtube.com/watch?v=Joo90ZWrUkU
Landry-
ReplyDeleteRandom Thoughts:
The indices ended higher with the Nasdaq leading the way. So far though, as I've been saying, this just looks like a pullback.
Futures are getting creamed pre-market so it looks like we'll resume the recent downtrend, at least on the open.
Trail and scale on existing positions as offered.
Wait to see if the market follows through from the open before establishing new positions.
The only trade I can come up with right now is shorting any bounce that occurs.
ReplyDeleteThen there's the other trading strategy- sit and watch.
Still in PAL and liking the price action. More or less.
ReplyDeleteDamn- The Nat Gas plays are almost all green right now.
ReplyDeleteHolly Cow..I'm sure I'll screw myself by saying this, but I just went green.
ReplyDeleteIf we can get back above 1085, it's clear until 1094.
ReplyDeleteTake a look at SWN/CHK/XCO/DVN/CLNE...etc.
ReplyDeleteCome on mr. market enough already, cough me up a deal that can't be passed up...
ReplyDeleteMaybe I'm wrong but it looks stronger than I expected all things considered. Should we be adding here or anticipating more downside like the majority seems to be?
ReplyDeleteI feel so clueless right now..
David- I've been looking for the margin data for ever. Can't find it. Hope you can.
ReplyDeleteUNH - Has been flying, told ya' I sold the bottom!
ReplyDeleteBreakfast and Bloody Marys here tomorrow at 4 AM pst. Everyone welcome. USA/AUS friendly match from Africa...Need to get in shape for the real deal :).
ReplyDeleteI'm not kidding by the way, ask JB.
Margin data - I suspect most margin is on the short side b/c "the market's gonna crash any day now...."
ReplyDeleteFrom BC today...
ReplyDelete"
1050, then 950.
Odds are higher we'll see 950 (i.e., -180) before moving +180 back into the range of recent cycle highs.
Europe, which has its own problems, clearly did not like the US Jobs Report.
Say goodbye to a V-shaped recovery."
Place your bets accordingly.
Given the price of Palladium today, PAL is doing remarkably well.
ReplyDeleteMoving to cash...i'm done with this market. 950 is inevitable.
ReplyDeleteBC - Certainly has a way with words, "dramatic" and "complicated" are terms that come to mind.
ReplyDeleteAfter running that post through my decoder machine, I'm leaning ever so slightly more towards buying this dip.
Out of PAL and flat for the weekend.
ReplyDeletePAL did do well today but palladium is crashing now and I can't be in no more:)
Nuff 'o 'dis shit!
How many of you think we close below/above 10000?
ReplyDeleteI would have to say below...
But then the market usually does the opposite of what I think it will do.
ReplyDeleteWe may bounce now that Europe is closed, but SPX seems to be making a bee-line for the 1068-1070 lvl
ReplyDeleteWell low and behold, gold gets a bid! U$D still ahead on the day...
ReplyDelete2nd - does it really matter if its today or not? The fact is it is inevitable. We're now 15 months into the recovery and we can only create 40k jobs? I guess the lack of hiring is good for companies' bottom lines which will keep profits higher. However, the market will assign lower multiples on all stocks now.
ReplyDeleteFD:
Long BGZ at $16.20.
HNU.TO hit a sell limit order today at $6.95 for 1000 shares I purchased a month or so ago at $5.95. Looks like I'll need another upgrade for my Laguna Beach vacation condo. :)
ReplyDeleteUNG can't go up at this rate forever, right? Next week it must drop below $8 at some point, right? Well, I just sold my remaining 500 shares of UNG at $8.23, which I acquired at $8.20. When UNG drops below $8, I'll sell 5 (or maybe 10!) UNG puts. Now I only have $1500 shares of HNU.TO riding (with the cost basis of $6). I placed a sell limit order at $7.5 for 800 of them and at $8 for 700 of them.
The action of the stock market over the past couple of weeks reminds me of the action in UNG over the past couple of months: repeated failed rally attempts that find support at some key level. Wouldn't it be cute for the market to rally next week, after all traders have been shaken out of their long positions by now?
ReplyDeleteGiven the September SPY puts that I purchased a few days ago (when S&P was 1080 or so), I am pretty well hedged once again, and so far today, I see, my portfolio is basically flat. So it's as if I have joined 2nd_ave in watching this from the sidelines...
Oh, and I forgot to mention: TBT hit a sell stop limit order today at $39.2 for 100 shares I picked up at $39.11 last week, and then I manually sold the other 100 shares at $39.02 a little while ago. If this market is indeed going down, then I'd like to have some more real cash available.
ReplyDeleteLet me get this straight- everything's going David's way, right?
ReplyDeleteUltrashorts are smokin'....NGas is smokin'...
Unbelievable! Nat Gas just keeps going and going! Another little push up and my $7.50 limit for HNU.TO will get hit!
ReplyDeleteThat would only be fair, 2nd_ave, after 1 year of things going against me: ultrashorts going down and UNG going down, then rebounding after I sell it for the fear of contango, and then going down again after I start scaling into it in February.
ReplyDeleteI think UNG/NG is catching a bid because of Hurricane Season. Before BP certain drillers used to do the same.
ReplyDeleteGlad I traded BP yesterday and stuck with UNG, although like David my mouse finger is getting itchy.....
Ultrashorts are doin' their job today, that's for certain.
ReplyDeleteDoes anyone else get the impression government's done with pumping the market and now they're gonna let the little birdie with the "mended" wing learn to fly on it's own accord?
Perhaps there's a partial cure for the real estate blues through increased immigration?
UNG - Amazing inverse correlation! Makes my pea-sized brain ache.
ReplyDeleteOK, change of plan with HNU.TO: I just sold 700 shares at $7.30. Now, when UNG drops below $8 next week, I will not only sell puts on it but will also reload HNU.TO. :)
ReplyDeleteI bought more UNG at 8.20. David why don't you just sell yours to me. We can have a chat room dark pool. We could be just like Goldman sacs or the gulf coast.
ReplyDeleteRobear
For a second there, thought I spied a couple buzzards circling FTWR... Searching out a stoop to poop?
ReplyDeleteDavid, Ung is not going to drop below 8.00. This is a breakout from a three month consolidation. I see 9.00 by next week.
ReplyDeleteBob, I already sold you my UNG at $8.23 earlier this morning. I'll buy it back from you below $8 next week. :) Just kidding -- I am sure UNG will hit $9 in no time. But it *will* drop below $8 before it hits $9.
ReplyDeleteWell if it happens I will be selling it to you because my stop is under 8.00. Unlike you David I have the weakest hand on the board. I guess my prediction will be wrong if the market takes a huge dump. Which seems to be happening now. Those dip buyers got smacked right in the jaw this morning.
ReplyDeleteBob
Gee wiz David how many shares did you sell. Your killing me:).
ReplyDeleteRB=Bob
SPX battle is on at the 1070 lvl
ReplyDeleteXCO is interesting to me here. Yes, it's run up a ton, and is getting extra whacks today. Sitting right on top of the 200ema.
ReplyDeleteHey Guys!
ReplyDeleteSitting aside.
Gettin' near 1065, the fat finger area.
ReplyDeleteWe probably get a little bounce off that, but if it breaks 1065, 1045 (Feb low) is next, then 1008.
Ya think we see the 950? If we see 950 then I think we test 666 again. Grantham says the market is worth 850. Might be time to get shorty for a while.
BTW, offed UNG at 8.40. Better to be lucky....
ReplyDeleteBob, UNG is known for its huge intraday swings, and setting stops on it is a sure way to get faked out. The only way to play it, as I found out, is to guess its general direction for the next 6 months and to buy the dips and to sell the rallies. In February, I figured that after the first "post-winter" dump subsides, UNG should rise once again into the summer. The "post-winter dump", of course, turned out to be much more severe than I thought, but thanks to small position sizes (the trick I learned from 2nd_ave), I was still able to keep scaling in right down to its very bottom at $6.85-$6.90, as I still had that summer rally in mind.
ReplyDeleteGreat trade, Craig! My sale of HNU.TO at $7.30 today happened when UNG was at $8.35. :)
ReplyDeleteMark do you know any LNG pure play companies that are US based.
ReplyDeleteBob
I am glad that I set a sell stop order on 1/2 of my TBT at $39.20, so as not to let a profit turn into a loss (and then manually sold the remaining TBT at $39.02). It is already at $38.65 now...
ReplyDeleteWell David, I'm inspired for your fortitude and ability.
ReplyDeleteI just placed a buy limit order for $700 shares of HNUZF at $6.20 (to replace the 700 shares of HNU.TO I sold today), which should get triggered when UNG just drops below $8.
ReplyDeleteDavid, I defer to your knowledge, but frankly I can not trade like you. I am too chicken.(all apologies chicky).I need a stop to sleep at night. I did do three round trips from 7.00 to 7.50 ish the last three cycles in ung. I am going to miss the money machine. I see that channel is broken know. If the market is not headed for 666. I still think UNG is a buy here.
ReplyDeleteBob
RB- Just one LNG...
ReplyDeleteCheniere Energy, Inc. (Cheniere) is an energy company primarily engaged in liquefied natural gas (LNG)-related businesses. The Company owns and operates the Sabine Pass LNG receiving terminal in Louisiana through its 90.6% ownership interest in and management agreements with Cheniere Energy Partners, L.P. (Cheniere Partners). It also owns and operates the Creole Trail Pipeline, which interconnects the Sabine Pass LNG receiving terminal with downstream markets. One of its subsidiaries, Cheniere Marketing, LLC (Cheniere Marketing), is marketing LNG and natural gas. It owns 30% of the limited partnership interests of Freeport LNG Development, L.P. (Freeport LNG), which operates the Freeport LNG receiving terminal. In addition, it is engaged to a limited extent in oil and natural gas exploration and development activities in the Gulf of Mexico. The Company operates in three segments: LNG receiving terminal business; natural gas pipeline business, and LNG and natural gas marketing business.
Mark, Wow, Wish I asked yesterday. Up 13% today. A day late and a dollar short. Going to watch this one. I am going to research, but do you know if they have a hedge book.
ReplyDeleteThanks,
Bob
RB- I don't know, but I'm sure they do. I've watched it, but even for someone who likes risk, it scares me if I couldn't baby sit it all day.
ReplyDeleteI might take a shot at AONE here.
ReplyDeleteInteresting to see RIG getting a late bid here.
ReplyDelete2nd - Isn't the number 4 (四) considered an unlucky number in Chinese culture because it nearly sounds like the word "death" (死)?
ReplyDeleteThe volatility in UCO is making me nervous. More specifically, the fact that I am not doing anything about it. So I just sold 2 July $9 puts on UCO for $0.95.
ReplyDeleteS&P has closed, once again, above the February low of 1056. A possible scenario for Monday is a gap down open at 1030, so that no one is able to exit cleanly at February low.
ReplyDeleteDavid- That's really funny...good move in my opinion.
ReplyDeleteMark, I figured that the best way to fight the volatility decay in ultra ETFs for medium-term swing traders is to scale into them via short puts, which also decay with time, and actually decay faster than the ultras themselves. So I should still come out ahead if UCO keeps jumping up and down for the next 1.5 months.
ReplyDeleteLooks like call holders weren't able to exercise their options, don't it?
ReplyDeleteIf we are indeed going way down, then at least I'll try to be smart about buying only high quality stocks, rather than speculative crap that dropped 90% on me in 2008. My next purchase on the long side will be a sale of July $10 puts on AA (for around $1) when AA itself drops below $10. Waiting patiently for good deals to come to me.
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