Natural Gas and the Influence of La Nina
Technical observations of RossClark@shaw.ca
Look for a high in gas prices soon, a correction and then a rally into the summer of 2017.
Oceanic Niño Index
Histograms identify October of moderate La Niña's
The tropical Pacific Ocean goes through natural warming (El Niño) and cooling (La Niña) cycles. Last winter was categorized as a 'very strong' El Niño comparable to those of 1972/73, 1982/83 and 1997/98. Subsequent years see moderate La Niña's. This year is experiencing such a cooling trend.
Natural gas futures contracts have a limited trading history, dating back to 1995. When we view the relationship between them and the La Niña Years we find a correlation. Natural gas tends to be strong for seven to ten weeks in September/October and rollover in November (2010 initially peaked at 7 and then extended to 13 weeks). The current rally has finished its ninth week. The weekly RSI(14) normally topped in the 60's. It is now 68. Watch for a high soon and then a downside break of 20% or more.
Once a break of six or more weeks has run its course, we could look forward to the possibility of a rally lasting into the summer of 2017.
Energy stocks that can be monitored for purchases on a deep correction:
In the US; Pioneer (PXD), Apache (APA) and WPX Energy (WPX). In Canada; Crew (CR), Seven Gen (VII), Encana (ECA), Advantage (AAV), Paramount (POU), Painted Pony (PPY), Bonavista (BNP), Peyto (PEY), Birchcliff (BIR), Tourmaline (TOU) and Enerflex (EFX).