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Announcements
Daniels Trading has launched an educational blog!
Learn about and keep up with the markets with the Daniels Trading blog. Here you will have access to multiple articles published by Daniels Trading brokers and the freedom to comment on what you have read!
The Daniels Trading blog is a complimentary resource waiting to be utilized by you. Gain access to the blog here.
Daniels Trading announces a new webinar series!
Daniels Trading is sponsoring a series of webinars through TAS and has opened registration to the public. Don’t miss out on this weekend’s 4-day event! Reserve your spot here.
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Markets to Watch
Natural Gas Strategies
Natural gas prices continue to decline and so far have been down about 16.5% in August alone. This has now pushed prices back down to the bottom of a four and a half month base at 4.25 to 4.140. Coincidentally, these low levels have served as a quasi-deflationary price low throughout the year as economic slowdown fears reach a fever pitch. Short term supply is high, as storage levels stand 219 bcf above their five year average and continue to build. Elevated levels of natural gas production are expected to continue, as producers exploit prolific onshore fields (shale). Additionally, the latest Baker Hughes data pegged the U.S. natural gas rig count at 992, just below the psychological 1,000 mark.
The latest EIA Short-Term Energy Outlook estimated 2010 production to grow by 1.9% to 61.1 bcf per day. Increased production in the face of sluggish demand has served to hammer natural gas prices by more than 30% since the start of the year.
We believe there will be one more push down in natural gas prices to come, and that should take prices down to new lows for the year.
Despite the bountiful supplies, there are signs of life on the demand front. The EIA forecasted overall natural gas consumption to increase 3.8% from 2009 levels to 64.9 bcf per day, which provides a 3.80 bcf per day shortfall to help sop up excess supply.
At current price valuations, it would appear that natural gas has virtually no weather premium priced in, and with peak hurricane season now upon us, prices could jump in a hurry. While inventories remain well above their five year average, that gap has contracted for eight straight weeks and is now just under 8.0%. This tightening has narrowed various spread relationships, which has greatly reduced the incentive to build inventories.
The steep decline in prices has also attracted speculator selling and has pushed the spec net short position to extreme levels. If we discount the 2008 financial meltdown, the current position is nearing the 2007 extreme that occurred when natural gas was trading at around $6.000.
As mentioned earlier, we expect the slide in natural gas to continue and post new lows on the year to $3.800-$3.850. This has the potential to trap shorts into the market at a time of “cheap” valuations.
If you'd like to receive daily information on Natural Gas trading strategies, click here.
If you'd like to discuss trade strategies to determine the best execution strategy for you regarding the market, contact us or call us toll free at 1.800.800.3840.
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Industry News
CPI Readings Depict Greater Chance of Deflation Rather Than Inflation
The U.S. economic outlook continued to deteriorate into the middle of August, with fears of a double dip recession growing almost daily. The Federal Reserve apparently isn’t concerned though, as they have not rushed to the rescue with additional easing efforts beyond the Federal Reserve’s Open Market Committee announcement on August 10th that they would use proceeds from maturing mortgage debt to buy Treasuries. With recent CPI readings depicting a greater chance of deflation rather than inflation, it wasn’t surprising to see a number of U.S.
Treasury yields reach fresh, historically low levels. In retrospect, the September Treasury market has managed a very surprising 8-point rally from the late July lows, where previously it appeared that the Treasury market was poised to roll over to the downside! However, news that China has reduced their holdings of U.S. Treasuries for the second month in a row coupled with increased vulnerability in the Dollar may reduce the attractiveness of U.S. Government securities.
The monthly U.S. payroll report was disappointing and U.S. manufacturing readings have been soft, making it difficult to turn the upward trending Treasury market around. U.S. 2nd Quarter Productivity showed the first decline in six quarters with results that were below expectations. June Wholesale Inventories and Sales figures both came in below expectations and served to add to the already fragile sentiment. Foreclosures in July jumped to nearly 93,000 units, up 9% from June and up 6% from a year ago.
With the recent appreciation of grain prices sparking global inflationary fears, the falling Dollar and the potential for reduced interest from China, one of the most important holders of U.S. debt, we suspect that U.S. Treasuries are beginning to look really expensive. A very significant top might be in the offing over the coming month.
The threat of a continued longer-term downtrend in the US dollar might provide some temporary support to the commodity market sector, but it will be more important to see an expanding global economy for commodity markets move higher.
If the sluggishness of the US and European economies spreads to China and other emerging markets, recessionary demand will return to the commodity markets.
Fund traders hold aggressive net long positions in many agricultural markets, so a shift in psychology should not be taken lightly. A number of factors could leave fund traders in a position to "throw-in-the-towel" on the long side of the commodities play. A few concerns which come to mind include: 1) China’s demand slows if their housing market bubble bursts. 2) India begins to export cotton, wheat, rice and sugar on the world market, which may dispel some beliefs that world supplies are extremely tight. 3) Energy supply continues to swell. 4) New regulations aimed at speculators have unintended consequences.
There are certainly plenty of factors that could spark sharply higher commodity prices, including weather, but we see many commodities in general as being too overbought given their supply outlooks. It will take strong global demand growth in just to rationalize their current price levels. We would caution traders to consider buying only in markets with supportive big picture fundamentals.
A NOTE OF CAUTION
Pockets of stronger than expected demand have emerged in some economically-sensitive markets recently, and buying surges from trend-following funds have left several markets overbought and vulnerable to significant corrections if the economy were to suffer and the right supply/demand fundamentals failed to emerge. If global or US economies continue to struggle, we will be concerned that markets like cattle, cotton and coffee will not have the demand to keep their uptrends intact. With speculators holding historically high net long positions in these markets, selling could accelerate if support levels are violated. Markets which are shifting from tight to more plentiful supply include sugar, soybeans and cocoa. As long as the global economy and/or a weaker dollar keeps speculative buyers interested and global demand active, these markets could show some continued strength. But a shift in psychology could cast a bearish shadow over all these markets.
Keep a pulse on the industry and access more industry news.
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| In This Issue |
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| Trading Tip |
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When you go stale, get out of the markets for a while. Trading futures is demanding, and can be
draining—especially when you’re losing. Step back; get away from it all to recharge your batteries.
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Watch “Gold Futures vs Gold ETFs”
Learn how to trade today’s gold prices efficiently!
Noble DraKoln, founder of Speculator Academy and author of Winning the Trading Game and Trade Like a Pro, compares Gold Futures and Gold ETFs in this informative presentation from CME Group.
The following topics are covered:
- Futures Liquiduty vs ETF Liquidity
- Gold’s Worldwide Role
- Gold Futures Volume and Notional Value Growth
- Comex Gold Futrues Contracts
- Futures Leverage vs ETF Leverage
- Futures Expense vs ETF Administrative Expense
Register now for instant access to this informative presentation on Gold Futures vs Gold ETFs!
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Featured Video
Long on value. Short on cost.
Self-directed futures traders are the most diverse universe we serve. That’s why we’ve created service packages to better meet your needs. Great self-directed trading deals strike the perfect blend of strong value with a competitive rate.
Click here or anywhere on the video image below to launch the “Self-Directed Online Execution Service” video page on the Daniels Trading web site.
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Upcoming Webinars
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PRESENTER |
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Craig Turner |
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Turner Breakout Reversal (TBR) Trading Methodology - Webinar |
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Wed, 08/25 |
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02:00 PM CST |
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The Turner Breakout Reversal (TBR) method is designed to quickly scan a given market and determine if a particular market is heading for a breakout or reversal whenever a market reaches critical support and resistance levels.
By using support & resistance with momentum indicators and responsible risk management, we are aiming to trade on higher quality signals that any trader can benefit from. In this webinar you will learn the basics of the TBR methodology to quickly identify markets heading for breakouts or reversals. You will see examples of recent trading opportunities as well as how to set up your own charts for trading TBR on your own. |
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Drew Wilkins |
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dt Pro 101 - Get Started with Our Flagship Trading Platform |
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Thu, 08/26 |
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01:30 PM CST |
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During this webinar we'll show you everything you need to know to get on the fast track using dt Pro, our flagship trading platform. Giving you direct market access, dt Pro provides everything you need to trade with speed, transparency and powerful indicators. |
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Burton Schlichter |
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Capture the Move! A predictive not descriptive look at today's market. |
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Thu, 08/26 |
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02:30 PM CST |
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Look over the shoulder of Burton Schlichter, an experienced dt broker and author of the "Capture the Move" newsletter, which is exclusive to Daniels Trading clients. He will use his trading experience to identify opportunities in today's markets and share with you his formula for trading! Join the others who have "Captured the Move" and allow yourself to become an active trader while still maintaining a busy life. |
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About Daniels Trading
Daniels Trading is a relationship-focused commodity futures brokerage located in the heart of Chicago's financial district. Founded in 1995, we have a history of providing effective and reliable trade executions to both individual traders and institutional investors around the globe. In addition to our focus on relationship and execution, Daniels Trading is a leader in providing ongoing education opportunities and resources for our customers.
Watch our "About Us" video.
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