January
14, 2002; Winter May Be Over For Energy
Unavoidably,
natural gas and other heating fuels are sensitive to winter weather.
Traditionally, if little cold weather arrived by early January, investors
abandoned expectations of strong fuel pricing for the rest of the winter.
This has been such a year.
Though
we would not put a lot of weight on it, here is a technical scenario for when
the gas price trend may turn up again. By
May 2002 the trend of the 200-day average would be at the daily price provided
the daily price remains near the current level.
We say that because the daily price leveled out about August 2001 and May
2002 is about 200 days later (see Chart).
Then if the daily price were to move above the 200 day moving average, perhaps on the strength of anticipated summer electrical demand, a favorable new price pattern would form. A current price above a moving average by definition is a rising trend. A current price above a rising moving average points to a trend that might be sustained awhile.