Monday, July 28, 2008

Natural Gas Dropping

IBD highlighted the above chart on their front page today. It's very interesting. Notice the following:

-- Prices were in a confirmed and strong uptrend from the beginning of 2008 to early July. Prices kept moving higher, breaking through resistance and consolidating gains. For two periods of time, the SMAs were aligned in the most bullish way imaginable: shorter SMAs above longer SMAs, prices above all the SMAs and prices using the 20 day SMAs as technical support.

-- Prices dropped hard after the first week of July. By mid-July prices were below the 50 day SMA (and all other short-term SMAs). Prices have dropped about 30% since early July. This is in line with the drop we've seen in the oil market.

From an inflationary perspective, this is incredibly good news. Energy inflation has been a driving force of rising prices over the last year or so, so any relief is welcome.