By Forrest Lowell

Sticking with my theory that bad jobs numbers are good for the market, I am setting up for a decent jobs number that will send the market down. When hopes are high there can only be disappointment. The good news was put into the market today and I really think all there is bad news to come on Friday. If the jobs number is worse than expected then I think there could be significant profit taking and a large down turn in the market. Now that the rally is nearing in on 8 weeks I think there is also significant pressure on market for a sizable correction and perhaps Friday is the start of it.

I was lucky enough to sell most of my position in CHK this afternoon on fears that the earnings would be a buy on the rumor sell on the news. Chesapeake was a little late to the game in deciding that they were going to cut production and how far they were going to cut it. They burned thru quite a bit of cash and are going to have to continue to monetize assets while prices are at very depressed levels. The headline number was very poor because they were forced to write down oil and gas properties that they acquired last year but are now worth considerably less at these natural gas levels. Thankfully their hedges are still working to their favor and they had a considerable gain on realized positions there. There is some risk going forward that their hedges are going to start to run out and they will be forced to sell their production at market levels. I am in the wait and see mode now for CHK, I am optimistic that by the time their hedges run out there will be enough production cuts across the industry that the supply and demand will be more in line with each other. The advantage that natural gas has is that the natural rate of decline for mature fields is something on the order to 10% vs. 4-5% for oil. This means that the industry is very able to quickly decrease production by just not drilling anymore wells. Of all the natural gas players CHK has the most aggressive hedges and still have assets to monetize to keep them afloat. But until the price of natural gas gets back into the $7-8 per million BTU no one makes money in the industry, some just lose it quicker than others. Disclaimer