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Natural Gas Rally: Heat Wave or Elliott Wave?
Energy Specialty Service uses Elliott wave patterns, not weather patterns, to determine the near-term trend in natural gas
By Nico Isaac
Mon, 02 Jul 2012 15:15:00 ET
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Unless your name is Chris Cringle, then you're well aware of Scorchageddon 2012 -- the record-breaking heat wave that blazed across North America from June 23 to July 1.

And, according to the mainstream financial experts, this heat wave did a lot more than just cause a historic surge in outside temperatures. In their eyes, it also caused a powerful surge in the price of natural gas to its highest level in nearly 6 months.
 
Here, the following set of news items from the final days of June 2012 set the scene:
 
  • Natural Gas Up, Backed By Heat" (Reuters)
  • "Too Hot For Natural Gas Bears... The new weather forecast is bullish as can be." (Wall Street Journal)
  • "Temperatures rose above 100 degrees in a number of states. That's giving a boost to natural gas prices, which have been depressed most of the year because of a mild winter." (BusinessWeek)
Well, you don't have to go far to see whether this fundamental logic is correct. If the heat wave did, indeed, move natural gas prices, then two things would be true:
 
  • The June rally in natural gas prices would have started when the heat wave started.
  • The near-term natural gas rally would have ended when the heat wave ended.
Basically, the chart of natural gas prices over the last month would look exactly like this one below:  
 
 
 
On the bottom of the next chart, you can see the actual dates and where in the progression of natural gas prices the heat wave really fell.  
 
 
 
Bottom line: Natural gas prices started to rally BEFORE the high-pressure dome over the Baja of Mexico moved into the United States on June 23 -- setting into motion the ensuing heat wave.
 
AND -- natural gas prices started to fall BEFORE the latest heat wave broke on July 1.
 
In the end, "fundamental" analysis of financial markets looks to events outside a market -- supply, demand, Fed policy, political events, and of course WEATHER patterns -- to forecast price trends. But these are NOT the dominant drivers of finanical price trends.
 
With Elliott wave analysis, however, objective indicators -- such as wave structure, Fibonacci price targets, daily sentiment, and technical momentum signals -- call all the shots. The result is a much clearer picture of potential near- and long-term trading opportunities.
 
When it comes to combing the 2 -- Elliott wave analysis AND Energy markets -- EWI's premier Energy Specialty Service is the clear leader. And, in the latest Energy Specialty Service intraday analysis of natural gas, our senior energy analyst reveals exactly where the "door to possibility" is opening.
 
Subscribe today for the full, objective details.

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Tags: crude oil, Elliott wave, fundamental analysis, natural gas
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