Over the past two months, the United States Gasoline Fund, LP (NYSEARCA:UGA), which tracks gasoline has fallen around 14% from the recent top of $64.27, to a low of $55.16. The drop in the UGA share price occurred after the stock broke a technical major trend line level.
Many talking heads in the media are looking at this drop and saying that it will benefit the economy. They are promoting that this should be viewed as a positive for the markets going forward. This banter from the talking heads contrasts their words when the UGA rises. At that point they are quick to point out how the increase is viewed as a tax hike on working Americans, and that it has a negative impact on the markets. But is that the case?
During the financial crisis of 2008, this leading indicator of inflationary or deflationary pressure bottomed out three months prior to the markets. The United States Gasoline Fund, LP (NYSEARCA:UGA) made a low of $16.10, during December of 2008 and never looked back. It continued to make higher highs and higher lows until topping out during mid June. The UGA led the markets, until recently. The sharp sell off in the United States Gasoline Fund, LP (NYSEARCA:UGA) is a sign of deflation creeping into the markets, it is certainly something we must pay attention to.
With all the geopolitical tensions around the world, oil and gasoline prices should not have fallen as sharply. The United States Gasoline Fund, LP (NYSEARCA:UGA) as well as oil prices are telling us things contrary to what the media or governments want us to believe; that there is a major slow down in the global economy. The chart of the United States Gasoline Fund, LP (NYSEARCA:UGA) is confirming that.
As traders all we look to do is to be on the right side of any trade. There will be a great buying opportunity for these commodities, and with the right set up on the charts, another shorting opportunity as well. Regardless of the direction of the markets, there is always a trade to profit from it.