ETF Trades & Updates: Natural Gas Pullback Setup By: Christopher Mistal | February 05, 2026 | Email | Print

If you missed the member’s only webinar on Wednesday, the slides and video recording are available here (or copy and paste in a new browser window: https://www.stocktradersalmanac.com/LandingPages/webinar-archive.aspx). In the webinar, Jeff reviewed the importance and significance of a full-month January gain and a positive January Barometer. He also covered the current economic backdrop, interest rates, and Bitcoin’s horrific midterm year track record along with the current slump in gold and silver.

 

Despite generous quantities of “noise,” the market does appear to be tracking seasonal patterns reasonably well. Headwinds remain plentiful but there are also numerous tailwinds that may not get as much attention. In consideration of it all and a positive January Barometer, Jeff affirmed our bullish Base Case scenario for full year gains of 8-12% is still in play. Along the way, some typical midterm-year weakness likely during Q2-Q3 is likely before the “Sweet Spot” of the 4-year cycles arrives later in the year most likely in early Q4.

 

 

After much speculation, Kevin Warsh has been nominated to be the next Chairman of the Federal Reserve. This change in leadership at the Fed is actually not all that common as there have only been 12 different individuals to lead the Fed going back to 1930. Naturally this does create some uncertainty and generally the market does not respond well to uncertainty. However, contrary to some research we have seen, a change of Fed leadership does not appear to be all that bad for the market.

 

Drawdowns are a worst-case scenario and are generally one of the more bearish datapoints to present. To give you a general idea, the average S&P 500 drawdown in a calendar year going back to 1930 is 16.1%. The flip side of the worst drawdown would be the best rally, a bullish number. S&P 500 has averaged an impressive 25.9% best rally in a calendar year since 1930. Over the same 96-year span, S&P 500’s average annual performance has been 8.0%.

 

 

Above we present the S&P 500’s performance following a change in leadership at the Fed. Historically, performance is not all that bearish. Aside from the 3 months later interval, all other interval’s frequency of advance (% Higher) are above our standard 60% bullish threshold and average performance is positive.

 

Going one additional step, let’s say Eugene Meyer was not responsible for the Great Depression and Alan Greenspan probably did not cause the market’s crash in 1987. Bad timing, perhaps? Removing them from the data essentially removes the most bearish data. Average performance across all intervals goes up and is positive while frequency of gains also improves noticeably and performance 1-year later jumps to an average gain of 12.7%, with the S&P 500 higher 90% of the time.

 

 

Based upon the NYSE ARCA Natural Gas Index (XNG), there is a seasonal tendency for natural gas companies to enjoy gains from the end of February through the beginning of June. Detailed in the Stock Trader’s Almanac 2026 on page 94, this trade has returned 16.19%, 17.82%, and 22.56% on average over the past 25, 10, and 5 years respectively. This seasonal strength can be seen in the accompanying seasonal chart of XNG highlighted in yellow below weekly price bars.

 

 

One of the factors for this seasonal price gain is consumption driven by demand for heating homes and businesses in the cold weather northern areas in the United States. In particular, when December and January are colder than normal, we can see drawdowns in inventories through late March and occasionally into early April. This can result in price spikes lasting through mid-April and beyond. Crude oil also tends to rise during this timeframe in anticipation of the summer driving season and many of the companies that produce and supply natural gas also have exposure to crude oil.

 

There is no doubt that the last few weeks have been bitterly cold across parts of the central U.S. and along the east coast this winter. Freezing temperatures have extended deep into Florida and snow blankets much of the Northeast. Here, just north of New York City, it has been below freezing for longer than I can quickly recall. The frigid weather has increased demand for natural gas but according to today’s Weekly Natural Gas Storage report, inventories have only modestly declined as of the week ending January 30, 2026.

 

First Trust Natural Gas (FCG) is our top choice to gain exposure to the company side of the natural gas sector. FCG could be considered on dips below a buy limit of $24.75. If purchased, consider taking profits at the auto-sell price, $34.51. In consideration of recent volatility, there is no suggested initial stop loss. As a reminder the auto sell price is based upon FCG’s buy limit plus the sector’s average price return over the last 25 years with an additional 20% added. Additionally, should FCG reach the auto-sell price, a tight trailing stop could be used in lieu of an outright sale. 

 

The top five holdings by weightings as of yesterday’s close are: ConocoPhillips, Occidental Petroleum, Diamondback Energy, Devon Energy and Hess Midstream. The net expense ratio is reasonable at 0.57% and the fund has approximately $530.4 million in assets. For tracking purposes, we will add FCG to the Sector Rotation ETF portfolio if it trades below its buy limit.

 

 

A second choice to consider is United States Natural Gas (UNG). Instead of holding stocks, UNG holds natural gas futures and swaps. It is designed to track the daily price movements of natural gas. Its total expense ratio is high compared to FCG at 1.24% and it has assets of approximately $482.9 million. UNG can be considered on dips below a buy limit of $13.20. If purchased, profits can be taken at the auto-sell price of $18.40. Also, there is no initial stop loss suggested for UNG due to recent volatility and the possibility of getting quickly whipsawed out of the position.

 

 

 

One sector seasonality comes to an end in February, Semiconductors. iShares Semiconductor (SOXX) has pulled back since closing above $360 on January 29 but it did display strength today closing with a modest gain. Sell SOX at $340 or higher. Should it fail to reach that level, its stop loss at $325 is the level to watch. Should it close below its stop or trade above $340 it will be closed out of the portfolio.

 

Biotech’s seasonally strong period has historically come to an end in early March. In preparation of this, iShares Biotech (IBB) and SPDR S&P Biotech (XBI) are now on Hold. As of the close on February 4, IBB and XBI were up 15.8% and 21.3% respectively for an average gain of 18.5%. This performance is solidly above the sector’s long-term 25-year average performance of 11.2% during its seasonally favorable period. Stop losses for IBB and XBI have also been increased.

 

Per last month’s update, iShares DJ US Telecom (IYZ) was sold and closed out of the portfolio on January 15 when it first traded above its sell price of $34.00 producing a humble 4.6% gain excluding dividends and trading costs. This sale was early as IYZ has since briefly traded above $37.00. Part of the recent surge in IYZ can be attributed to strength in Verizon shares but that momentum appears to be fading now.

 

Following a sluggish start in December, SPDR Energy (XLE) and S&P Oil & Gas Equipment & Services (XES) have risen briskly this year. XES traded above its auto-sell price of $97.90 on January 23 and per standard trading guidelines (found at the bottom of the portfolio table below) was sold and closed out of the portfolio for a 21.8% gain. XLE remains and is on Hold. In response to its impressive gains thus far, its stop loss and suggested auto-sell price have been increased.

 

Copper trades in United States Copper (CPER) and Global X Copper Miners (COPX) are on Hold. CPER and COPX both benefited from strength in copper and precious metals gold and silver, but the precious metals’ rally has likely come to end. This has put pressure on COPX and to a lesser extent CPER. Copper’s trend remains positive, but its momentum has slowed. Suggested stop losses have been raised to protect some profit and allow for potential additional upside.

 

Invesco DB Agriculture (DBA) is still on Hold. Shares remain stuck in a narrow range. Today’s modest gain is encouraging but additional follow-through is needed to warrant putting any additional capital to work here.

 

In anticipation of seasonal weakness possibly persisting a bit longer this month, all remaining positions not previously mentioned in the Sector Rotation portfolio can be considered on dips below their respective buy limits in the table below. This applies if you do not have an existing position(s) or if you are looking to add to an existing position(s).

 

Please note some stop losses have been adjusted to account for recent gains. 

 

 

 

Positions in the Tactical Seasonal Switching Strategy portfolio were up 3.6% on average as of the close on February 4 compared to 3.7% in the January update. The tech slump has hit QQQ the hardest followed by SPY. However, DIA and IWM were both up over 6% which was a modest gain compared to last month. At a little more than halfway through the Best Six Months for DJIA and S&P 500 and not even halfway through NASDAQ’s Best Eight Months, performance is mixed. All positions in the Tactical Seasonal Switching portfolio can be considered on dips if you do not have a position or are looking to add to an existing position. Please see the table below for suggested buy limits.