Comments on: Crude Oil / Natural Gas Ratio Heading Higher

By: martinkronicle

martinkronicle — Wed, 19 May 2010 12:59:33 +0000

I don't use the arithmetic mean as a buy point. My guess is some traders
play the /reversion/ to the mean as a trade, and once achieved, they go
flat. They sometimes have to wait out long periods b/c the ratios don't
have to move for anyone.

By: martinkronicle

martinkronicle — Wed, 19 May 2010 05:59:33 +0000

By: Gavin Murphy

Gavin Murphy — Tue, 18 May 2010 17:40:12 +0000

Thanks Michael. Looks like it's getting close to the buy level already! I would have thought since low prices cure low prices, and therefore presumably have a tendency to revert to a mean, that such lows do NOT beget further lows…unless I am misunderstanding this apparent contradiction? Keep up the great work by the way, the recent podcasts were great.

By: martinkronicle

martinkronicle — Mon, 10 May 2010 19:31:59 +0000

Low prices cure low prices. Multi-year lows beget further multi-year
lows. It's not in my nature to buy something as such. If prices are too
low for producers to bring further nat gas to the market, they will stop
and we'll have to see the contracts trade sideways until all the glut
has been consumed.

If you're following Victor Sperandeo's 123 Trend Reversal rules, the
front month would have to trade above $4.500 to start an uptrend.

my best,

Michael Martin
MartinKronicle.com <http://martinkronicle.com/>

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By: Gavin Murphy

Gavin Murphy — Mon, 10 May 2010 16:16:44 +0000

Very interesting post. What would be a good point to buy Natural Gas at do you think given that it is at multi year lows right now, if I was to hold for 5 or ten years? Jim Rogers reckons it's a buy (albeit I am paraphrasing!). Thanks again Michael.