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One of the Best Short-Selling Opportunities of the Year

By Jeff Clark
Thursday, November 15, 2012

The price of natural gas is shockingly high.
 
Natural gas prices bottomed in April, and they've enjoyed a big rally since then. In fact, yesterday, natural gas was trading near its highest price of 2012.  
 
And it may lead to one of the best short-selling opportunities of the year... 
 
Take a look at this updated chart of natural gas...
 
 
There's something horribly wrong here. And it may lead to one of the best short-selling opportunities we've seen since... well... since natural gas prices peaked last December.
 
As longtime readers know... the U.S. is sitting on a glut of natural gas. I'm not just talking about a little more supply than demand. I mean an enormous glut – the kind that happens when all of our natural gas storage facilities are filled to capacity, and oil producers are just letting the natural gas byproduct escape into thin air. That is exactly what is happening now.
 
The U.S. Energy Information Administration reported last week that natural gas inventories reached a record-high 3.92 trillion cubic feet. That's 3% above the record storage amount achieved last December. And it's nearly 7% higher than the five-year average storage amount for this time of year.
 
All that supply should have forced prices lower... But natural gas is trading at its highest price of the year. Something just doesn't make sense.
 
So one of two things can happen to balance out the pricing...  
 
    1.  
    If we're in for one heck of a brutal winter, consumers could burn up the excess natural gas inventory... thereby justifying the high prices.
     
    2.   Natural gas prices could acknowledge the current supply glut... and prices would fall.
 
The U.S. had far more supply than demand last winter as well. And as you can see in the chart above... prices plummeted in response. If we get similar action this year, shorting natural gas could be a hugely profitable trade.
 
Best regards and good trading, 
 
Jeff Clark




Further Reading:

The surge in natural gas prices has led to a roaring bull market in the sector. Many investors in the trend are up big. But Frank Curzio agrees the party will be short-lived… Get more of his thesis here: It's Time to Take Profits in Natural Gas Stocks.

In The Daily Crux
Market Notes
Small-cap Russell 2000 Index touches a three-month low.
 
"Boring" consumer stocks are nearing new highs... Hershey, Kellogg, and Heinz all sit within a few percent of fresh highs.
 
"China's Google" Baidu breaks down to a two-year low.
 
Big clean energy fund PBW plunges to a new all-time low.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1355.49 -1.4% +8.3%
Oil (USO) 31.77 +1.2% -16.1%
Gold (GLD) 167.14 +0.0% -3.5%
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Gold Stocks (^HUI) 447.96 -4.6% -24.5%
10-Year Yield 1.59 +0.0% -22.1%

World ETFs
Symbol Price
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52-Wk
Singapore (EWS) 12.83 -1.7% +12.7%
USA (SPY) 135.93 -1.4% +10.7%
S. Africa (EZA) 63.77 -3.2% +4.6%
S. Korea (EWY) 56.61 -0.9% +4.5%
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Canada (EWC) 27.17 -2.0% +0.7%
China (FXI) 35.74 -0.7% -1.6%
Japan (EWJ) 8.76 -1.2% -3.6%
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India (IFN) 21.92 -1.2% -5.2%
Lat.America (ILF) 40.65 -1.4% -7.0%
Russia (TRF) 13.50 -2.2% -15.3%

Sector ETFs
Symbol Price
Change
52-Wk
Construction (PKB) 15.59 -2.5% +36.4%
Media (PBS) 15.54 -2.3% +20.3%
Health Care (IYH) 80.86 -1.3% +18.7%
Financials (IYF) 56.51 -1.7% +18.4%
Consumer Svcs (IYC) 82.96 -1.5% +18.0%
Retail (PMR) 24.48 -1.5% +15.4%
Real Estate (IYR) 61.46 -2.0% +15.4%
Biotech (PBE) 21.97 -1.8% +13.7%
Water (PHO) 18.94 -1.3% +12.7%
Telecom (IYZ) 23.00 -1.4% +12.3%
Insurance (PIC) 16.56 -1.8% +11.5%
Industrials (IYJ) 68.41 -2.1% +9.9%
Defense (PPA) 19.56 -2.2% +9.6%
Big Tech (QQQQ) 62.24 -1.2% +9.4%
Software (PSJ) 25.85 -1.4% +3.7%
Utilities (XLU) 34.27 -0.7% +1.2%
Transportation (IYT) 87.37 -2.6% -0.1%
Basic Mat (IYM) 64.35 -1.8% -3.1%
Semis (PSI) 13.24 -2.3% -8.1%
Nanotech (PXN) 5.47 -2.7% -12.4%
Alt. Energy (PBW) 3.56 -3.0% -34.9%

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