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.
2016
October Tops
1998/99
1999/2000
2007/2008
2010/2011
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).
