Price doesn't spike like this in the summer; some of this spike is as a result of the natural price alignment with oil; but there is, or will be, an appreciation of the 'scarcity' value of natural gas by the market one of these days.

http://www.trendvue.com/charts/2005/08/tv20050830-28.gif

As I note on the chart above... is this a spike or what traders call a "breakout" to new and ultimately much higher prices.

http://www.trendvue.com/charts/2005/08/tv20050830-29.gif

On the shorter term daily chart this is a classic breakout through and above a consolidation zone in a very strong trend. So strong a trend that under "normal" situations, experienced technical traders would be looking for a significant market reversal.

During last weeks CL and NG sell off I felt the market was, in my judgement, acting too quickly on the technical signs suggesting a potential big reversal in CL/NG and dismissing to readily the potential for Katrina. I held and added to my positions on the dip.

Now... post breakout, especially on a breakout which was facilitated by a big news event, there is still greater than 50/50 chance price will pull back significantly here, but the breakout level will be first tested to see if it acts as new support.

Unless the news coming out of the GOM is very, very good, we can expect that level to hold, if it indeed is even tested.

Finally, I will draw your attention to the gap up on the daily chart - gaps are found, more often than not, near swing turns. They are very often a sign of unsustainable (at least in the short-intermediate term) price movement. You need more buyers to step in to keep prices going up, and often a gap up creates a natural lull in buying as market participants judge a stock or market as having climbed too far away to consider jumping on board.

Quite often such gaps mark a swing high, sometimes even a major top, depending on where price is in the market's cycle. This market has been running up strong for a very long time, so by conventional rules and history, some technical traders will have been expecting a significant pull back if not even a reversal in the trend from up to down.

Now that we are clear on what frequently follows a news or event driven gap... sometimes the follow on is quite different indeed.

When a gap forms because of a change in fundamentals - where the story has changed for the intermediate to long term - such a gap can mark a point in time where price, often after pausing for a day or two, never returns (never being relative as in weeks or months or sometimes years and occasionally never).

Could we be there? Very possible. What to do about it?

Well if one is a trader and is not already long the market, such a person carefully monitors the multi day high and piles on there, or on any suitable retracement or useful pattern that occurs within the range formed above the gap, and looks to hold if price clears the recent highs anew, ultimately moving up protective stops to break even once price has cleared "noise".

A market that runs away higher than such a gap -- at a time when price is already at historic highs -- would soon draw in more participants and create a melt up, or a siuation not unlike 1999 - 2000 or GOOG where price just keeps on growing higher and people keep piling on in fear that they've missed it forever.

Ultimately, peak oil or not, such a move simply can not sustain itself, and price will pull back, often sharply, for a while - but it may not come back to the breakout levels but instead create a new range of consolidation at much higher prices.

An ideal time for that... if Katrina impact is very long... will be next spring.

PS: One thing to watch for in the energy sector stocks (producers) is any talk about revaluation --- changing the traditional metrics by which such stocks are historically priced. Once upon a time price : cashflow ratios would be in the low single digits. Some are talking that perhaps high single digits would be more appropriate, implying 50 - 100% gains in some energy sector stocks.

PSPS: I didn't intend for this to turn into a little analysis lecture, and reading this I see that lack of intent showing up as an incomplete effort, but I have my other work to attend to so will leave this as an installment which may or may not be useful to anyone.

I can certainly seem them looting if its to serve the public; the darker scenario is, being first responders on the scene and knowing more than all of us do about the situation, they've all concluded the situation is utterly hopeless.

http://www.wdsu.com/weather/4913354/detail.html