ETF Trades: Natural Gas Weakness Likely to Persist
By: Christopher Mistal
June 06, 2017
With the first five months of 2017 officially in the record books we have updated our 1-Year Seasonal Pattern Charts of Seventh Years of Decades, Post-Election Years, Newly Elected Republican Administrations, All New Elected Administrations and 2017 year-to-date below. As of yesterday’s close, DJIA, S&P 500 and NASDAQ were all within a few percentage points of reaching the historical average highs. All three indices are well above typical Post-Election year performance and the performance of past Newly Elected Republican Administrations. The pattern they appear to be following most closely is that of Seventh Years of Decades. This pattern is heavily influenced by 1987 with a peak in early August for DJIA, late-July for S&P 500 and October for NASDAQ.
[DJIA Seasonal Chart]
[S&P 500 Seasonal Chart]
[NASDAQ Seasonal Chart]
A repeat of 1987 is not that likely, but some weakness over the coming summer months is expected. Little actual progress has been made with healthcare or tax reform, the Fed is poised to hike rates again and Congress still needs to address the federal debt limit. Any misstep by the Fed or letdown from Washington could easily derail this year’s strong advance.
NASDAQ’s Best Eight Months Update
As of the market’s close today, both the faster and slower moving MACD indicators applied to NASDAQ were positive. With NASDAQ’s modest loss today, a one-day decline of over 1.5% (97.46 points) would be needed to turn NASDAQ’s MACD Sell indicator negative. 
[NASDAQ Daily Bar Chart]
When NASDAQ’s MACD Sell indicator becomes negative, we will issue our NASDAQ Seasonal MACD Sell signal and begin clearing out remaining technology and small-cap positions held in the Almanac Investor ETF Portfolio. We will also review current holdings in the Stock Portfolio and take action where needed.
June Sector Seasonalities
June offers just one high-probability seasonal trading opportunity. This trade is based upon the NYSE ARCA Natural Gas index (XNG) and takes advantage of seasonal weakness by natural gas stocks beginning in mid-June through the end of July. XNG has been in a downtrend since peaking in early December of last year and the trend is currently showing no sign of reversing.
[XNG Daily Bar Chart with 1-Year Seasonal Pattern]
First Trust Natural Gas (FCG) has also been in an extended downtrend since last December. Its 50-day moving average bearishly crossed below its 200-day moving average in mid-March. While Stochastic, relative strength and MACD indicators applied to FCG are all negative. FCG could be shorted on any rally up to resistance around $22.00 or on a breakdown below support at $20.34. If shorted, an initial stop loss at $24.15 is suggested.
[First Trust Natural Gas (FCG) Daily Bar Chart]
Ample natural gas supply and healthy inventories are likely to continue to pressure its price and the shares of the companies that explore, develop and produce it are likely to suffer as well. Mild weather conditions are also putting a damper on demand as air conditioners remain idle and their associated electrical demand nonexistent particularly here in the northeast where today’s high did not reach 60 in New York. 
ETF Portfolio Updates
In preparation for the end of NASDAQ’s “Best Eight Months,” stop losses have been raised significantly for IYW, XLK, IWM and QQQ. See table below for exact values. When we issue our NASDAQ Seasonal Sell signal, we will close these positions out of the portfolio.
Defensive positions in TLT, AGG, SLV and GLD are on Hold. When we issue NASDAQ’s Seasonal Sell signal we will reevaluate these positions and possibly officially increase the size of these positions.
Recent short trade ideas, IYT, XLF and XLB are around unchanged as of yesterday’s close. IYT is currently showing a 5% loss, but it appears to be failing at resistance. Continue to Hold IYT, XLF and XLB.
[Almanac Investor ETF Portfolio – June 5, 2017 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in AGG, FXB, GLD, IWM, QQQ, SLV, TLT, XLE and XLP.