Tuning Your Ear to Opportunity: Natural Gas’s Year-Long, 80% Selloff

Natural gas’s bearish song began to play 1 year ago. Being able to hear it was a different story.

by Nico Isaac
Updated: August 10, 2023

Recently I heard about the “The Great Subway Station Violin Experiment” of 2007. (Sept. 2014 PBS) Legend went: On aa January morning during rush hour, one of the planet’s most famous violin virtuosos, Joshua Bell, donned a baseball hat and t-shirt, set up a busking spot at the busiest metro stop of the Washington, DC subway, and began to play classical scores on his $3.5 million Stradivarius for 43 uninterrupted minutes.

Bell is someone who then raked in a $75,000 base fee for playing a single concert, $100 each for nosebleed seats.

With a hidden camera in tow, Bell wanted to see if people would stop during their hurried subway commute and listen to the lyrical masterpiece being played (unknowingly, professionally) 3 feet in front of them. From Bach to Schubert, Bell delivered each piece flawlessly, as if he were performing solo at the Royal Albert Hall.

Of the 1070 people who passed Bell en route to their trains, only seven people stopped in their tracks to heed the music, while 27 people tossed single dollar bills and loose change into his open violin case without pausing to their destination.

It’s a rueful commentary on how jaded and “deaf” today’s city dwellers are, especially those rushing to and from the world of finance. Every morning, traders and investors race out their doors or onto their computers, buried in the avalanche of news surrounding the markets they follow, moving at warp speed on autopilot towards their destination of (what they hope will be) a viable opportunity.

There are so many “fundamental” distractions pulling in every different direction, from political events to earnings data, weather reports to supply/demand figures. Attention is divided and diffused into a narrow set of news-driven blinders.

But in the end, the true “masterpiece” of a market’s trend may be playing right in front of them. Only, they’re too wrapped up in the mainstream hustle to hear it.

One poignant example of this comes from the natural gas market. One year ago in August, investors were on Cloud 9 — or rather, Cloud 10 — for natgas as its prices tapped double digits at $10 for the first time since 2008.

And, thanks to a raft of supportive “market fundamentals” such as scorching demand and pipeline disruptions, natgas seemed primed to sizzle. From the Wall Street Journal on August 23, 2022:


“The 14-year highs reached this week by U.S. natural-gas futures show the unceasing demand for U.S. shale gas across the Atlantic–and likely point to rising prices and market volatility ahead.”

“Natural gas price returns to the bullish track,” wrote Economies.com on August 23.

And on August 22, Yahoo.com described “natural gas bulls run[ning] rampant” and said:

“Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. The upward trend should aid gas-weighted producers.”

The “fundamental” blinders guided investors and traders straight onto the bullish tracks without passing go. But while the doors of that north-bound train closed behind them, natural gas prices took a very different turn. After peaking at a 14-year high on August 22, prices collapsed in a stunning, 80% selloff to 30-month lows in April of this year.

And there, standing on the platform playing a bearish tune for natural gas’ future before the tide turned, was our August 2022 Global Market Perspective. The one holding the bow was EWI’s chief energy analyst (also editor of Energy Pro Service) Steve Craig, who showed this chart of NYMEX natural gas, which identified the recent rise as a completed Elliott wave B rally. The stage was set for a large decline in wave C to take prices at least 50% lower:

“The next sustained move should be a five-wave decline that carries prices below 5.325 to give the Primary wave B retracement, a flat, enough legs to be counted as complete.”


From that peak, natgas was indeed slashed in half in a powerful decline to multi-month lows late last October. In the ensuing month, volatility was steroidal. As natgas rallied, our analysis attempted to keep up with the whipsawing moves but to little avail. Until November 25. That day, Steve Craig updated his Energy Pro Service analysis of natural gas, and introduced a bearish alternate, “second best” Elliott wave forecast:


By December 1, 2022, that bearish Elliott wave forecast had moved into the primary, “most probable” position. That day, in Energy Pro Service, Steve published the following chart and sounded the bearish alarm:

In line with the Intraday comments, today’s downside follow-through argues for the alternate count…The better interpretation at this juncture is to label the price action from the 10.028 rebound high as waves 1 and 2 (of (C)… which puts the market at the forefront of a powerful third-wave decline.”


And from there, natgas re-committed to the downside in a powerful selloff to 30-month lows this April.

230810 - NICO

Unlike Joshua Bell’s flawless violin mastery, Elliott wave analysis doesn’t always hit the right note. As mentioned, trying to hold onto last year’s October-November volatility in natural gas gave us figurative hand blisters!

But no matter how challenging the market environment, Elliott wave analysis always provides clearly defined key and critical price levels to help traders manage risk every bouncy step of the way.

Whatever your timeframe, a big-picture outlook of Global Market Perspective or a close-up daily and intraday investigation of near-term trends of Energy Pro Service, we have the service for you.

A Service for Every Energy Investor’s (and Trader, and Producer) Needs

Before the bearish reversal in natural gas unfolded, our Global Market Perspective subscribers were ready. Similarly, if you need our latest big-picture forecasts of forex, cryptos, stock indexes, bonds, metals, energy and more — 50+ markets in total — Global Market Perspective delivers all that too, directly to your screen once a month for just $59.

For active traders watching the intraday and daily movements, our Energy Pro Service presents detailed analysis for those time frames, focusing on meaningful developments underway in natural gas, crude oil, heating oil, and major energy ETFs.

Go from following market trends, to falling in line with their objective paths of least resistance.