Natural gas ETFs exploded higher and corn popped to a record
while the market pulled back Monday after staging the biggest
two-day rally of the year.
United States Natural Gas (
) -- the largest ETF tracking the commodity -- popped 6.11% to a
22.01, a five-month high.
UNG has exploded 53% from an all-time low in April. Meanwhile,
natgas futures shot up 57% from a 10-year low in mid-April to
more than $3 per billion cubic feet, or bcf, this week. Producers
have cut back production in response to low prices, while demand
from power plants increased to meet air-conditioning needs during
the summer heat wave. Temperatures in the lower 48 states
averaged 3 degrees higher than the 30-year average and 0.9
degrees warmer than the year-ago period.
"Extreme heat and relatively low natural gas prices have
pushed gas for power generation to historically high levels this
summer," the U.S. Energy Information Administration said in a
weekly natural gas report. Power burn for the week ending July 25
averaged 34.9 billion cubic feet per day, 2.3% higher than that
prior week and nearly 2% greater than the year-ago period. Baker
Hughes natgas rig count decreased by four to 518.
Should the U.S. experience a cold winter after producers
decreased production, supplies could evaporate at a record rate,
says Shawn Hackett, founder of Hackett Financial Advisors in
Boynton Beach, Fla. Natgas prices would have to rise back to $4
to $6 per bcf to entice producers to ramp up production again, he
U.S. natgas supplies currently are 18% above last year's
levels and 16% above the five-year average, according to the
Despite massive progress, UNG still trades below its 200-day
moving average, which has been a key resistance level since it
topped in July 2008.
Teucrium Corn (
) heated up 2.15% Monday to an all-time high of 51.15 as crops
shrivel from the worst drought in 50-years. Futures jumped
another 3% to a record high of $8.17 per bushel on the Chicago
Board of Trade.
Prices for wheat and other agricultural commodities also
In afternoon trade, theSPDR S&P 500 (
) eased 0.10%.SPDR Dow Jones Industrial Average (
) added 0.16%.PowerShares QQQ (
), a basket of the 100 largest nonfinancial stocks on the Nasdaq,
let up 0.16%.
The S&P 500 should hit 1,420-1,440 ($142-$144 for SPY), up
2%-3.4%, by the presidential elections if the Europeans can
figure out the amount needed for bailouts and how the debts will
be repaid, says Ronald E. Lang, a principal at Atlas Wealth
"With Europe pushing us around with headlines and a gross
domestic product numbers coming in at an expected 1.5% growth in
the economy, most people feel we are still trading in a range,
waiting for a catalyst," Lang wrote in a client note Monday.
"The GDP number is showing very slow growth in the economy and
there isn't much on the immediate horizon to propel that number
to the 3%-4% most investors and economists were looking for at
this point since the financial crisis in 2008."
The S&P 500 should reach 1,450 ($145.00 for SPY) by year's
end for a 4.8% return from Monday's level, says Ed Yardeni,
president of Yardeni Research.
"Investors and traders have learned that while all those
rounds of 'whatever it takes' (from central banks) haven't solved
the European financial crisis and haven't achieved escape
velocity in the U.S., they have provided lots of liquidity to
financial markets," Yardeni wrote in client note Monday. "This
certainly helps to explain the resilience of the U.S. stock
The S&P 500 has gained 10.3% year to date vs. -1.2% and
+2.8% for the same periods in 2010 and 2011.
"That's impressive given that the Q2 earnings season has been
relatively uninspiring so far, if not disappointing since
expectations were already knocked down by concerns about the
recession in Europe," Yardeni added.
Traders best book their gains from last week and sit in cash
as volatility increases in the face of low trading volume and
negative earnings reports outweighing positive ones, says Alex
Gurvich, manager ofAdvisorShares Rockledge SectorSAM ETF (SSAM)
"There is nothing like central banker's market supporting
statements to bring about the euphoria," Gurvich wrote in a
client note. "In case of the European Central Bank, it was to
support the currency, while in case of the Fed here in the U.S.,
to support the economy. Whereas investors have read it as a
promise to support the stock market."
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, was flat.IShares MSCI Emerging Markets Index (EEM) shed
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