Weekly Update: January 8, 2014

| January 8, 2014

Weekly Update: January 8, 2014


Commodity Watch:

As you may be aware, it is spectacularly cold in many parts of the country right now.  A blast of cold polar air has descended on a vast swath of the Midwestern, Southern, and Eastern US.

As a result, heating demand is soaring to some of the highest levels on record.  In fact, electricity grid operator PJM Interconnection reported that they hit a new winter demand record on the morning of January 7th at 139,069 megawatts.

The same is likely happening for natural gas demand…

Tomorrow’s EIA inventory report may not show a huge draw, but next week’s most certainly will.  As you may know, each week’s EIA report gives supply/demand data for the previous week.

However, it’s interesting that the price of natural gas is not moving higher with this latest wintery blast.  That tells me the market is looking forward to the warming spell expected to hit by this weekend. 

According to the NOAA, temperatures are forecasted to jump to above average for most of the Eastern US by this Saturday.

Given the fact we’re nearing expiration in the US Natural Gas Fund (UNG) January 2014 $22.00 Calls, I suggest you close this trade.  We got the initial jump to $4.50 mmBtu on this call, but since then, the price of natural gas has been stagnant.

Let’s get to the remaining open positions…


Portfolio Recap:

. . . . iShares Comex Gold Trust (IAU) January 2014 $12.00 Puts

Gold received a bit of buying interest late last week thanks to rumors of increasing Asian demand.  But the commodity is returning to its choppy and meandering ways this week thanks to strong US economic data.

With the yellow metal essentially stuck at $1,200 an ounce area for the past few weeks, our $12 IAU puts are starting to lose value.  We’ll need a big decline in gold next week to get this low-risk put position firmly in the green.

For now, keep holding these puts for further downside in gold…

. . . . US Oil Fund (USO) February 2014 $33.50 Calls

This morning’s bullish oil call is getting off on the wrong foot.  Even though EIA inventories revealed a substantial draw today, it wasn’t quite enough to bring bullish investors into the market.

However, with oil testing the $93 technical support area this afternoon, there’s still a very good chance we see a sizeable technical bounce out of this commodity soon.


Category: Commodity Trading