Thus far, we are off to our worst week of the year, as uncertainty surrounding Greece led to a massive sell-off during Tuesday’s session. Though we have the opportunity to make up lost ground, it will have to come in the form of important economic data that has the chance to turn sour, and steepen losses on the week. Friday will see U.S. non-farm payrolls as well as unemployment figures. While that data has been encouraging in the past few months, a miss could be devastating given the recent volatility in the markets. But when it comes to today’s session, there will be another data report that will also be important to watch, though its impact will likely be limited to one asset class; natural gas [see also 25 Ways To Invest In Natural Gas].
Natural gas has been one of the worst performing commodities over the past few years, as it has consistently lost ground and hit new historic lows. Many hoped to see some much needed relief when this year’s winter rolled around, when in fact this has been one of the mildest winter’s the country has experienced in over half a century. This has led to lower demand for natural gas-powered appliances, leading to high NG stockpiles, and finally resulting in depressed prices [see also Understanding Contango Through Natural Gas Futures].
Natural gas and its underlying investment vehicles will take the spotlight today, as the weekly EIA storage report is released. While this may seem like a trivial data point being that it comes on a weekly basis, NG’s recent volatility and weakness gives this report a major say in how its related assets will perform for the next few days. Today’s report is expected to show a drop in stockpiles of 82 billion cubic feet of the commodity. Last week’s report saw stockpiles shrink less than expected, a bad sign for NG investments as well as for this release [see also 12 High-Yielding Commodities For 2012].
In light of the EIA’s storage data, today’s ETF to watch will be the United States Natural Gas Fund LP (UNG). UNG has long been a popular trading tool despite its abysmal performance; the fund has lost over 86% in the trailing three years. If today’s report comes in lower than expected, meaning NG use has shrunk, UNG will more than likely take a nose dive for the session. But a positive figure will allow UNG to post massive gains. Either way, making a bet on natural gas is extremely dangerous, though it has the potential for high rewards [see also Why You Should Sell UNG, Buy FCG].
Disclosure: No positions at time of writing.