Andrew Hecht BNO BOIL DBE DBO DCNG DGAZ DNO DTO DWT FUE Games GAZB GRN JJE KOLD OIL OILD OILK OILU OILX OLEM OLO ONG RJN SCO SZO UBN UCO UGA UGAZ UHN UNG UNL USAI USL USO USOD USOI USOU UWT WTID WTIU

Commodities Recap For The Week Of November 16, 2018 – VelocityShares 3x Long Natural Gas ETN (NYSEARCA:UGAZ)

Commodities Recap For The Week Of Oct. 12, 2018 - ProShares VIX Short-Term Futures ETF (NYSEARCA:VIXY)

The story of this week:

Natural Gas- 130% Day by day Historic Volatility and plenty of motion within the UGAZ and DGAZ ETN merchandise

It was a wild week within the power sector, and whereas most eyes have been specializing in the swoon in crude oil that took the worth of close by December NYMEX crude oil futures to a low of $54.75 per barrel on Tuesday, November 13, the pure fuel market was going the opposite means. Crude oil declined by 28.eight% since reaching a excessive at $76.90 on October three because the oil market imploded. Over the identical interval, the flamable and risky pure fuel market exploded. The UGAZ and DGAZ triple leveraged ETN merchandise had fairly every week.

Whereas crude oil slumped by virtually 29% over the previous six weeks earlier than recovering to the $57 per barrel degree on Friday, the pure fuel market blasted off over the previous two weeks.

Supply: CQG

Because the every day chart of December NYMEX pure fuel futures exhibits, the worth of the power commodity moved from a low of $2.84 in mid-September to the very best worth since 2014 at $four.929 per MMBtu on Wednesday, November 13. The rise of 73.6% induced every day historic volatility to rose to over 135%. The December pure fuel futures contract was buying and selling on the $four.35 per MMBtu degree on Friday, November 16. Natural fuel moved greater for 3 causes. First, stockpiles of the power commodity going into the height season of demand are at 14% under final yr’s degree and 15.6% under the 5-yr common in accordance with the Power Info Administration as of November 9. Whereas there’s report manufacturing of pure fuel nowadays, demand from energy era and exports of LNG have triggered shares to drop. Second, chilly climate early within the winter season has despatched shivers by means of the market that a colder than common winter season will trigger inventories to say no to dangerously low ranges. It was snowing in New York Metropolis on Thursday, November 15 and chilly circumstances have descended over giant areas of the USA. Lastly, pure fuel had been a sale on each rally over the previous years. Whereas the oil market had attracted an overabundance of speculative lengthy positions in early October as sanctions on Iran approached, the worth of pure fuel moved over the $three per MMBtu degree which had been an space the place promoting led to income for a lot of market members since February 2018. It’s doubtless that hedge funds and different market members discovered themselves lengthy crude oil in a falling market and brief pure fuel in a rising market forcing them to scramble for an exit which exacerbated the current worth motion in each markets. Open curiosity, the whole variety of lengthy and brief positions in a futures market, declined considerably in each the oil and fuel futures which is an indication of serious liquidation as the costs moved.

With regards to the pure fuel market, the turbocharged Velocity Shares 3X Long Natural Gas ETN product (UGAZ) and its bearish counterpart (DGAZ) skilled extraordinary volumes and worth volatility over the previous week. The fund abstract for UGAZ states:

“The investment seeks to replicate, net of expenses, three times the performance of the S&P GSCI Natural Gas Index ER. The index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI Index.”

The fund abstract for the inverse product, DGAZ, has the identical fund abstract, however its holdings are the inverse of the UGAZ product. Each of those market instruments use leverage to create a minimum of triple returns, in order that they endure from vital time decay and vulnerable to reverse-splits. UGAZ just lately underwent a 1-10 reverse-cut up, and DGAZ will expertise the identical quickly. These merchandise are solely applicable for very brief-time period buying and selling and investing functions. Volatility at over 135% each day prompted the turbocharged ETNs to expertise unimaginable strikes. The worth of pure fuel moved from $three.724 on Friday, November 9 to a excessive of $four.929 on November 13 and backed right down to a low of $three.882 on November 14 earlier than closing the week on the $four.35 per MMBtu degree. From the low to the excessive over the previous week, pure fuel rallied by 32.four%, then dipped by 21.2% and closed the week with a achieve of 16.eight%.

Supply: CQG

Over the identical interval, UGAZ moved from $141.60 on the shut on November 12 to a excessive of $260.23 on November 14, a low of $105.10 per share on November 15 and was on the $150 degree on Friday, November 16. UGAZ rallied by 83.eight% from the low to the excessive, moved 59.6% decrease and closed the week with a achieve of a small achieve of 5.9%. UGAZ did an excellent job through the rally however turned in a depressing week-on-week efficiency. UGAZ is simply applicable for very brief time period, intraday or in a single day buying and selling functions. The instrument trades a mean of 1.three million shares every day. On November 13, over four.57 million shares trades and the next day virtually three.7 million shares of UGAZ modified palms.

Supply: CQG

As pure fuel rallied from the shut on Friday, November 12 to the excessive on November 13, DGAZ fell from $7.75 to $2.81 per share, a decline of 63.7%. The drop within the worth of pure fuel from the highs to Thursday’s low brought about a 21.2% within the futures market, however DGAZ moved from its low on Wednesday to a excessive of $four.84 on Thursday which was a rally of 72.2%. DGAZ closed on Friday on the $three.33 degree, down 57% on the week. DGAZ trades a mean of 15.6 million shares every day, however on Wednesday over 172.5 million shares modified arms and Thursday’s quantity was over 157 million shares. Volatility within the pure fuel market at over 130% despatched plenty of market individuals into the triple-leveraged ETNs, however their efficiency demonstrates that timing is the whole lot with regards to these merchandise whose worth can disintegrate in minutes at occasions. The week-on-week efficiency of each merchandise is a warning that any place that sits in a portfolio for greater than someday is a harmful proposition. These sitting with shares of DGAZ at $three.33 on Friday will quickly discover themselves with one-tenth of the shares on the $33.30 degree, and the decay will start as soon as once more over the approaching days, weeks, and months. Leverage comes at a worth which is a pricey proposition over time.

In the meantime, pure fuel goes into the winter season with the bottom degree of shares in years, and the worth has damaged above the highs from February 2018 at $three.661 and December 2016 at $three.991. The subsequent degree on the upside is the current excessive and the $5 degree after which the February 2014 peak at $6.493 per MMBtu. Fasten your seatbelts, if Mom Nature makes the winter season colder than common this week’s motion could possibly be the start of a volatility bonanza. Nevertheless, if heat winds trigger heating demand to be lower than the typical, a return to decrease costs could possibly be within the playing cards for the power commodity that’s experiencing document manufacturing in america.

We noticed plenty of motion in markets throughout all asset courses over the previous week because the greenback index rose to a brand new excessive at 97.53 final Friday. Nevertheless, the dollar corrected from that prime and closed the week near the 96 degree because it continues to make greater lows and better highs.

Highlights in commodities

  • Gold posts a 1.19% achieve on the week
  • Silver strikes 1.71% greater after rejecting a decrease low at $13.86
  • Platinum posts a 1.10% loss for the week, and was buying and selling at a $376.40 per ounce low cost to gold
  • Palladium strikes 5.20% greater on the week and trades at a brand new all-time excessive at $1168.30 on Friday
  • Copper turns greater and rises four.10% on the week and closes at slightly below the $2.80 per pound degree
  • December iron ore futures transfer 1.67% decrease since November 9
  • The BDI continues to fall shifting 17.14% decrease because the final report
  • Rotterdam coal falls four.44% on the week following crude oil costs to the draw back
  • Lumber down 1.95% on the week however strikes up the restrict on the January futures contract on Friday
  • December NYMEX crude oil down for the sixth straight week because it loses 6.20% since November 2
  • January Brent crude oil strikes four.83% decrease in comparison with final week
  • The premium for Brent over WTI in January closes the week on the $9.96 up $zero.30 on the week
  • Gasoline falls 2.74%, and heating oil was four.56% decrease since final week on the December futures contracts
  • The gasoline crack unfold in December rebounds 18.02% greater whereas the December heating oil crack strikes zero.94% decrease on the week as markets retreat from current seasonal developments
  • Natural fuel explodes 14.87% larger on the December futures contract on the week making it the perfect performing commodity marketplace for the second consecutive week. The EIA reported an injection of 39 bcf into storage on Thursday for the week ending on November 9. Natural fuel on the highest worth since 2014 on low shares going into winter and a chilly snap
  • Ethanol up simply zero.32% since final week
  • November soybeans up zero.62% on the week
  • December corn falls 1.35% on the week
  • CBOT wheat posts zero.95% achieve on the week. December KCBT wheat buying and selling at a 24 cents low cost underneath CBOT wheat down 9.50 cents from final week in a bearish signal for wheat
  • March sugar slips simply zero.31% on the week
  • December espresso down 1.10% since final week’s report
  • Cocoa strikes 2.53% decrease on the week on weak spot within the British pound
  • Cotton strikes 2.52% decrease on the week
  • FCOJ futures achieve zero.84% on the week as January futures stabilize
  • Stay cattle up zero.68% since final week on December futures
  • January feeder cattle achieve 1.89% because the earlier report
  • December lean hog futures explode 7.66% on the week and shut on the prime finish of their buying and selling vary
  • The December greenback index futures contract strikes zero.41% decrease after the index makes a brand new excessive at 97.53 on November 12
  • December Long-Bond futures buying and selling at round 139-22 up 1-23 for the week as volatility in shares and commerce points might trigger the Fed to sluggish their hawkish path on charges
  • The Dow Jones Industrial Common closes at 25,413 on Friday, November 9 down 576 factors on the week as volatility continues. The VIX strikes zero.78 larger and was buying and selling at 18.14 on Friday.
  • Bitcoin closes at $5,474.40 Friday down $857.26 or 13.54% since final week because the crypto declined by way of the underside finish of its 2018 buying and selling vary
  • Ethereum moved decrease to $171.82 down 18.09% because the final report

Worth Modifications for the week

GSG closes the week at $16.14 per share, down $zero.21 since final week’s report on weak spot within the worth of crude oil

Supply: Barchart

GSG is the iShares S&P GSCI Commodity-Listed Belief which represents a diversified basket of commodities futures contracts, has internet belongings of $1.34 billion and trades a mean day by day quantity of 505,043 shares. The fund abstract for GSG states that it holds a “diversified group of commodities futures.”

Any funding includes substantial dangers, together with, however not restricted to, pricing volatility, insufficient liquidity, and the potential full lack of principal. This doc doesn’t in any means represent a suggestion or solicitation of a suggestion to purchase or promote any funding, safety, or commodity mentioned herein, or any safety in any jurisdiction by which such a suggestion can be illegal underneath the securities legal guidelines of such jurisdiction.

The Hecht Commodity Report is a should-learn…

The Hecht Commodity Report is among the most complete commodities stories obtainable right now from the #2 ranked writer in each commodities and valuable metals. My weekly report covers the market actions of 20 totally different commodities and supplies bullish, bearish and impartial calls; directional buying and selling suggestions, and actionable concepts for merchants. Greater than 120 subscribers are deriving actual worth from the Hecht Commodity Report.

Disclosure: I/we have now no positions in any shares talked about, and no plans to provoke any positions inside the subsequent 72 hours.

I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (aside from from Looking for Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.

Further disclosure: The writer all the time has positions in commodities markets in futures, choices, ETF/ETN merchandise, and commodity equities. These lengthy and brief positions have a tendency to vary on an intraday foundation.

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