Market Overview

Divergences Galore; Market Remains Indecisive (USO, UNG, APA, DVN, RRC, GAS, X, MT, AKS, NUE, FCX, NEM)


Thus far, this trading week has been full of reversals and divergences mainly emanating out of the materials and commodities sectors. Traders and investors seem to be unsure as to where the market should be and in what direction it should head.

For example, after disappointing inventory data, natural gas futures plunged over 3% in the face of crude oil futures being up 2.5% and nearing 52-week highs. Major oil ETF, United States Oil fund (NYSE: USO) consequently closed near intraday highs at $42.60. As of late, rising oil prices have led to higher natural gas prices as investors look to alternative energy as a possible growth sector. Natural gas futures along with natural gas ETF, United States Natural Gas fund (NYSE: UNG), have come twenty percent off of their lows during crude oil's rapid spike from the mid ‘80s.

Despite natural gas' morning freefall, shares of underlying natural gas companies diverged, showing no of signs of abating as their equity prices held firm. Shares of Apache Corp (NYSE: APA), Devon Energy (NYSE: DVN), Range Resources Corp (NYSE: RRC), and Nicor (NYSE: GAS) all showed signs of strength and mainly stayed in positive territory throughout the decline. That deviation may have been a sign of things to come as natural gas futures soared off of their lows and went from being down over 3% to being up over 1% – a four percent swing in two hours. The jump led to a subsequent, steady rise in underlying natural gas equity prices.

UNG closed the day up 0.25% at $11.50; thirteen cents off of its intraday high. Apache closed positive 0.38% at $130.92.

Range Resources was by far the strongest of the group putting in a 1.51% gain at $58.46.

Nicor closed near the top of its daily range at $53.70.

Devon Energy came into selling pressure at the end of the session; closing up marginally at $91.77.

Another divergence came in the form of steel stocks taking a big hit in the early going while mining companies continued their climb following yesterday's strong intraday rebound.

Right from the start of trading, shares of steel companies tumbled. US Steel (NYSE: X), Arcelor Mittal (NYSE: MT), AK Steel Corp (NYSE: AKS), and Nucor (NYSE: NUE) all put in big losses, showing little buying interest throughout the day.

US Steel was the weakest of the group and closed down 4.21% at $53.94. The equity broke well below its 20- and 50-day moving averages after trading above them in the previous two sessions.

AK Steel finished down 3.07% at $15.78.

Arcelor took a 1.61% haircut, closing at $36.15.

Nucor closed down 1.31% to $46.02, resting directly on top of its 20-day moving average.

The mining companies fared much better as Freeport McMoRan (NYSE: FCX) put in gains of 0.56%, closing in the middle of the day's trading range at $55.55.

Newmont Mining (NYSE: NEM) was also strong, closing up 0.85% at $54.58. Shares of the company came under some selling pressure in the last thirty minutes of trading as copper futures moved from positive to negative territory.

What do all these divergences and reversals mean? It means that traders, money managers, and investors have no idea where the market is going and are willing to let it churn until more concrete information becomes available. Perhaps tomorrow's jobs numbers will provide that catalyst for a decisive market move. Until then, it is a trader's playground.

Posted-In: AK Steel Holding Apache Corp Arcelor Mittal Devon Energy Corp Freeport McMoRanLong Ideas Short Ideas Trading Ideas


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