NFTRH+; A Deeper Look Into Energy Commodities

Each week in NFTRH we robotically note the ongoing downtrend in crude oil and post-crash basing situation in NatGas. Let’s look at both commodities in more detail. As a reminder, I currently hold both NOG, a unique Oil & Gas play and AR, a company very exposed the the price of Natty. Side note: NOG’s daily chart looks pretty good, better than the sector as a whole and AR’s chart has the potential at least to base and bottom.

Oil is in a very favorable Commitments of Traders setup as hedgers are about as mildly net short as they ever get after the long downtrend to date.

Public optimism is on the other side of that trade, displaying very little optimism as would be expected with the net hedging levels above.

To complete a positive internal look at the crude oil market, the seasonal is okay, rising on average into October, when it tanks (so to speak). This would actually fit well with a classic broad market top in or near Q4. But let’s not get too far afield with details. This is about oil and gas, and oil checks out very well internally.

Gas, on the other hand is less stellar, but okay with regard to hedgers. But then again, they were net long at the best reading and unlike oil, still are. Pretty good.

The public registered a contrarian low risk point at the end of the Gas crash, and the reading is still good.

The seasonal is a different story, but in adding AR I chose to bet that it will not play out to average perhaps due to the war related disruptions last year that may have thrown averages out of whack. Notice that August-October are actually positive, but man that’s a lot of volatility to get there. Good old Natty.

Bottom Line

While oil trends down and Natty attempts a post-crash base and upturn, the internals are constructive to very good. What’s more, a rally in these cyclical commodities, if they were to come about, could logically play out against an extended market top (time wise) into the classic topping season of September into Q4. We are open to if not planning for SPX 4800, after all.

Graphics from Sentimentrader.