Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Professional’s Input on Natural Gas

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I read your blog almost every day and enjoy the insight.  I trade a little bit (when I have some time), and follow some of your Slopers recommendations and strategies.  I have posted a couple of times recently.

I read your post recently on Natural Gas, and thought I would send you a note....{professional information removed at author's request}…..  

I wanted to point out that UNG is not the best way to play the eventual price rebound.  There is some serious contango in the market (so much so that the current price of $2.73 for Oct is just under 60% of the Dec contract at $4.69).   Prior to current month expiry, the UNG ETF “rolls” the contract to the next month.  When this roll takes place, they sell the current month at say $2.73 and buy the next month at $3.89 (current price of Nov).  When they do this the price of UNG does not change as it ends up buying a higher priced contract for which to trade around (they try and match the percentages of the change in price).  Effectively, your cost base gets eaten away by the contango and you lose out on the current contract price.  The only way it makes sense to buy an ETF like this is when there is backwardation in the market of the underlying commodity.

Further, the better way to play this would be to look at HNU in Canada, which is 2X the daily change in nat gas.  The benefit here is that you get the exchange rate change in a falling market, but the underlying ETF still works off the percentage change of NYMEX Natural Gas.  Still has the same contango issue.

Today’s Star of the Show: Gold Miners

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Amidst an otherwise humdrum session, there was one standout: precious metals. Whether it was silver, gold, or anything else bright 'n' shiny, precious metals had a stellar day.

My largest position right now is a long on GDX, which is the gold miners' ETF. It was up nearly 10% today and — importantly — had sensational volume.

0902-gdx2

Poor old natural gas, however, had another terrible day. UNG is now down 85% from last summer (!) And remember, this isnt' some nutty Internet startup. It's natural gas (yes, yes, I know it's acting like a closed fund now, but you get the idea). I took on a "starter" position today at 9.50, but I'm not exactly a strong hand on this one.

0902-ung

I'm done for now, I think. Adios, muchachos!

Getting on the Gold Train

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I've been conflicted about precious metals for a while, mainly because two different prognosticators whom I respect – on one hand, Gary Savage, and on the other, Elliott Wave International. – have had two completely opposing views on gold's direction.

Gary is a shameless gold bull. He describes gold miners as "stupid cheap", and although he acknowledges most people will get whipsawed out of their positions, he is a very committed precious metals bull.

The folks at Elliott Wave, however, have been beating the "gold is heading under $700" drum for what seems like ages. I've been shorting GDX and GLD from time to time – sometimes with success, more recently – – not.

GLD's weird behavior yesterday (strength in the face of adversity) made me reconsider my mildly bearish position, and with today's breakout, I'm long both GLD and GDX. Looking at the graph below, you can see there are a series of progressive higher zones above which GLD must break. With each one, the likelihood of a barnstormer of a bull run gets better.

0902-gld

I'm not a big proponent of inverted H&S patterns at the top of a market, but there's little doubt in my mind that a breakout above 100.44, established 19 months ago, would be extremely positive for gold bulls.

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