BOIL chart with a bit of explanation...
The price chart is BOIL. The black line is $NATGAS, the spot price of natural gas. Gas "tends" to trade opposite of "stocks" in the long term, for which in my charting I tend to use NYSI to represent stocks, as less focused, more generic. That opposite trading pair correlation is well documented here, but it is rigorously shown in relation to longer term major trends and big moves and trend changes, rather than in relation to short term trading, where other factors might introduce "noise"... making it useful to understand what the noise is and what impact it might have. Still, gas tends to form long deep bottoms in bull markets for stocks... and then bottom and bend higher as stocks (and oil) peak if, when and as the markets head into recession. Stock market crashes define reversals in energy pair trades, as oil moves lower as demand craters with recession, while gas moves higher as steady demand that is economically insensitive makes it a more appealing asset to own.
So, what's with the red bars ? That is a plot of a price up-down pair in which I used NATGAS as the UP, and NYSI as the DOWN components. The aggregate of the two "should" show an aggregate in the directional trends in both natural gas prices and stock prices... As those are or are related to the "steering" signals for BOIL. BOIL is wrongly postured as 3X Nat Gas prices, give or take some leverage, but it tends to be WILDLY variable from the daily fix. It does not track "actual" gas prices, but uses an esoteric Bloomberg manufactured price index to represent gas prices... which I think is, itself, "spoofed". It often does not follow actual gas prices, not just in the inter day trade, but often over more sustained periods. BOIL is tricky to trade short term... which it is advertised as intended for. The BOIL traders aggressively spoof the trade to bend the trend data... often painting the BOIL chart with massive misdirection... With good awareness of that fact, you can monitor other trend data and pre-determine the misdirection being applied into the end of day trades, or aggregating over some days as the index is skewed... but, often resulting in a next day open delivering quite dramatic swings, higher or lower, between a closing price and the next day's open... Experienced traders use their awareness that the price is "corrected" (to the also spoofed index) only at one moment each day... to scam the neophyte options traders out of easy $ by painting misdirection into the charts.. But, that wild variation in the intraday trade, that carries across close to open daily, or Friday to Monday... and the spoofing of the underlying index... tends to be filtered out by longer term chart views that correlate price action back to the unavoidable in underlying trend drivers... the price of natural gas... and its longer term trend driver in "stock market trends" as a reflection of market health... and thus of relative advantage in "where the bull is running" at a given time. BOIL is thus often detached from reality in the short term... Also making it worthwhile to be able to identify turning points in the trends... that operate outside the typical one, two or three days of misdirection that can be built into the index error and the trade...
So, why this chart now ? The crazy trading in BOIL over the last few years was tied to Russia invading Ukraine, driving global gas higher, and Euro gas much higher, first as Russia throttled back, then as the pipeline was blown up by "Ukraine" (?) Anyway, gas spiked higher and BOIL did a nice run... based on the expectation that LNG would come into the market from the US, the impact of which would be to equilibrate US gas prices with global prices... $9 versus $4... Biden stepped in to prevent the LNG happening... and sabotage at the plants under construction imposed delays. A Trump trade in early 2025 has now worn off... but, at the same time, the long planned LNG is finally coming on line... as we head into winter... which long term forecasts suggest is going to be... a hard winter like we've not had since... 2013, I think...
The perfect storm for BOIL, now: LNG finally starts flowing in volume, removing excess capacity and supply, we get a hard winter spiking demand, stocks peak and roll over... and currency debasement continues, and accelerates with a recession forcing higher spending / lower revenue... the ongoing trends in currency devaluation driving all commodities higher... which will break correlation and require gas prices recognize "asset" values and trend with gold, not relative to pricing trends defined in a rapidly shrinking value in fiat currency. Anyway... it could happen... Here's the charts:
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