In what seemed like a very quiet pre-holiday session of trade, a stealth rally took hold among the major indices, but an all-out explosion took hold in the natural gas futures markets, which traders attributed as front-month contract expiration.
Yes, there was news that Viking Energy Royalty Trust, a Canadian investor in oil and natural-gas assets, agreed to buy Calpine Natural Gas Trust for $320.9 million (C$379 million), but that should in now way have had December Natural Gas futures (ng04z) $7.976 +17.41% surging more than $1.00.
The recently spotlighted Natural Gas Index (XNG.X) 295.62 +1.97% (see Monday's Index Trader Wrap) surged to its fourth-consecutive session all-time high with El Paso Corp. (NYSE:EP) $10.34 +5.72% and Williams Companies (NYSE:WMB) $16.44 +4.38% leading the sector's gains.
U.S. Market Watch - 11/24/04 Close - Major Energy Futures
It's hard to prove that front-month expiration was entirely responsible for the notable DIVERGENCE in natural gas futures contracts, but we all know that some weird things can happen as an expiration nears. Today's EIA weekly inventory report, which encompasses crude oil, heating oil and unleaded gasoline found a much smaller response.
In a single day, Natural Gas futures erased what looks to have been a rather flat 5-sessions of trade.
In today's 03:15 PM EST update, I was scrambling to get a point and figure chart of January Natural Gas futures (ng05f) posted, but my analysis to look for resistance near the $9.00-$9.10 area should hold, if what we did see today was truly just some front- month repositioning.
Still, I get the impression that today's move in natural gas was a "surprise" to many, and buyers kept piling on toward today's settlement.
Energy futures markets are closed for trading on Thursday and Friday at the NYMEX, where next settlement won't be until Monday. The NYMEX did announce on Monday that it will permit trading of Brent/WTI spreads on its satellite trading floor in Dublin on Thursday and Friday, but I don't think equity traders here in the U.S. would find too much of an impact from energy markets in Friday's half-session.
Market Snapshot / Internals - 11/25/04 Close
The day before and after Thanksgiving is usually a day I write off as meaningless in the broader scope of things. As I've discussed in years past, and again this week, things tend to be more bullish as any "sell side" activity has taken place earlier in the week, where the head honchos either don't show up for work on Wednesday, or take early leave at lunchtime. Today's internals at the a/d line, if not the NH/NL indications may give some validity to this line of thinking.
TRIN stayed pretty much around the 1.0 level, and with the a/d line improving throughout the session, I get the feeling that there wasn't a lot of sell decisions being made.
Volumes at the more institutionally held NYSE were the lightest this month, and lowest since October 11.
The lights were on (green), but nobody was really home.
U.S. Market Watch - 11/24/04 Close
It took every bit of bullish manipulation to get the Pharmaceutical Index (DRG.X) 298.77 +0.01% into the green by today's close, but all sectors ended in positive territory.
As the month of November grows old, the Stock Trader's Almanac notes some seasonally bullish tendencies for Oil and Gold/Silver.
I can't say why, but I'm growing a little jittery toward being long gold equities right now. I've noted in the past that it can be a very bad sign when the equity your trading long is lagging the underlying commodity. With the dollar looking very oversold and the U.S. Dollar Index (dx00y) now far-exceeding its bearish vertical count of 92.00 (0.20 box size) and building a looooong column of "O" from 92.60 to 88.80, its rare to not see some type of correction when the point and figure chart watcher sees more than 18 O's.
I will also note that I had written some covered calls on some Newmont Mining (NYSE:NEM) $47.86 -0.99% at $47.50 last week, that I had purchased in the low $40's this summer. I can't say I'm overly disappointed at this point in time. Something doesn't feel/look right that NEM can't get above $50 despite the dollar getting crushed, and gold itself having broken to new multi-year, and 52-week highs earlier this month.
Pivot Matrix -
Friday's session for equities will be one-half day, and I wouldn't be expecting any "fireworks."
The Dow Diamonds (AMEX:DIA) 105.02 +0.03% looked to me like they were being shorted all day near their WEEKLY Pivot and unless one of the components has some type of major news on Friday, I get the feel that Friday's trade for the majors is going to be rather tight.
While the Wednesday before Thanksgiving is usually an optimistic trade, it shows with the NDX/QQQ trading and closing above their WEEKLY R1s.