The channel break may indicate that lower prices are ahead. A reasonable target could to the September 26th, 2012 gap. This gap is represented in the chart below by the white oval. If one was inclined to take a trade like this, it may be advantageous to sell the UNG ETF. The futures would be an organic way to play price moving down, but the UNG fund has structural problems. The ETF underperforms the future and has a 10-day correlation of only 0.88. This could be explained by the nature of the product.
As displayed below, natural gas has a positively sloped futures curve and as the fund rolls contracts they lose money; put simply.
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The Hang Seng lost 1.2% today, putting it down 1.3% this week, while the Shanghai composite lost 1% putting it at a 3 year low. The resources sector was among the worst performers with China Shenhua, China’s biggest coal producer, losing 3.5%. PetroChina stumbled back 0.6% after a 21% decline in Q2 net profits. CNOOC lost 1.1% today, 5% this week, due to week profit and a 40% slash in their dividend. Banks were also week today with the Bank of China losing 1.3% after its weakest quarterly profit growth in 3 years. China construction bank is also down 1.9% today.
The FTSEurofirst is beginning today flat as investors lock in profit to minimize risk and exposure. Mining stocks were the biggest losing sector today as their sector is very economically sensitive. Eurasian natural resources and Rio Tinto were among top fallers on the index losing 3.6 and 3.3% respectively. Eurozone banks were also week with the sector losing 1.3% today. Today’s focus will be on the meeting between the German Chancellor and Greek Prime Minister.
Global bank eyes are on Denmark’s after last month’s experiment of setting its main deposit rates for banks at -0.2%, which the ECB said it may follow.
Apple is now 4th being knocked down from 2nd, in Q2 in China’s smartphone market. Consumers are waiting for the next Iphone or buying other brands; Samsung maintains the lead.
Crude, gold and silver are set to begin below while natural gas is on the rise this morning.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu
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