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I watch two oil & gas indices on the ASE. The Oil & Gas Index is clearly
vulnerable. Its daily MACD and OBTR are in negative territory. The weekly MACD
is now crossing into negative territory. The weekly OBTR, while still positive,
is now trending downward fome its recent high. Friday it broke below its 50 day
moving average but it remains well above its 200 day moving average.
The Natural Gas Index is not quite as negative. A comparison of the two indices
shows that the Oil & Gas Index has considerably outperformed the Natural Gas
Index over the last year. The cause of this, I suspect, is the widespread
expected mild winter as a result of El Nino. Recently natural gas futures have
been very strong giving the producers the opportunity to hedge their forward
production at attractive prices. Whether El Nino produces a warm winter remains
to be seen, but even if it does, the producers shouldn't be hurt if they do
some hedging now. Another factor is the disappointing drilling results this
year for natural gas. Chesapeake Energy had a major drilling program in
Louisiana in the Austin Chalk formation (which is producing some excellent wells
in Texas) and came up with a disasterous exploratory well program in late spring
and had to write off over 200 million in drilling and leasehold expenses.
Technically, the Natural Gas Index on a daily chart is showing negative MACD and
OBTR charts. Weekly, both indices are still positive.
I still hold sizable positions in the natural gas producers based on fundamental
factors although lately I have been shifting a small amount into silver
producers. I've noticed the silver inventories on the Comex have been dropping
most of this year. As for my natural gas producers my major positions have been
held for a little over a year so I have a few month to go for long term capital
gains. I periodically hedge my positions in the futures market by shorting
natural gas contracts.
Re: long term capital gains- I heard a fund manager state that their study of
capital gains indicates holding positions 18 months produces much poorer results
than one year or less.
Interesting. I tend to agree from my results.
Bob Doeden
Chicago
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Steven Buss wrote:
> I don't have a systematic and carefully thought through view of this. What
> I can say is that in going over S&P industry charts one of the three
> clearest topping pattern industries is the oil sector in general. Oil
> industry stocks would clearly be in the bunch to be considered for shorting
> based on a higher level "topping pattern" chartist view.
>
> Steven Buss
> Walnut Creek, CA
> sbuss@xxxxxxxxxxx
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