The name “Natural Gas” and the three letters “UNG” are perhaps more closely associated with the term “toxic waste” than anything within financial circles. Mention “I’m bullish on natural gas” and you will probably be laughed out of the office or even taken away by men in white coats! Yet, jokes aside, it does seem that the bullish wheels are now in motion for natural gas and the natural gas ETFs UNG and GAZ (particularly the later). Over the last few days we have had multi-week highs in crude, gasoline, and heating oil reaffirming the bullish trends which are now some 12 months old. Looking at the ETF GAZ it failed to make a new low in early December and is now only 10% away from a higher high (a close above $16). UNG needs to close above $12 (up 16% from current levels). We think that these levels will be breached over the coming days.
When it is all said and done, for how long can the CRB and Crude continue to rise and TIPS outperform the US 10 yr before natural gas breaks to the upside? We think that sooner or later natural gas will follow the lead of the two charts below:
