ALERT: CRUDE HIGH YESTERDAY AFTER 6% SELL-OFF ON DOLLAR WEAKNESS.
 
PETROLEUM MARKET

Crude seems to have stabilized a bit after falling nearly 6% in two days, despite crude stocks  rising 1.6MM bbls. Interestingly, trading volume was more than a third above the 30-day average, after a slowdown in the second half of March, one of the reasons we did not have much faith in the last leg of the rally. There also seems to be a general acknowledgment by participants that high prices and economic recovery are unsustainable. We never though that $147 crude price was given the credit it should have for tipping the economy over into recession. With core producer prices up and and continuing unemployment claims falling the era of QE may be coming to a close, especially with the ECB already pulling the trigger. True there is a high degree of event risk with reform in the air in the producing countries, but those countries need the oil revenue to survive and should keep flowing. A test of $100 may not be far off.
 
 
TECH TALK

Prices actually rose a bit after a sharp two day fall yesterday. The active buy signal was extinguished Monday when prices fell through the 10-day moving average. The bias is to the downside for crude. Resistance is quite near at about 108.50, the consolidation area just before the last leg higher. However support is quite near, as well. At 106.42. Yesterday's recovery off a low of 105.98, basis June shows some residual strength, but that should dissipate if tested again. A settlement below 105.00 could bring a challenge to 100.00 quite quickly.  
 
 
NATURAL GAS

The sellers reappear above 4.10. and some consolidation should be expected with weather inconclusive. But the facts are hard to ignore just as they have been for a year. Mild weather and ample supply are tough to overcome, even if demand may be improving along with the economy. Last week's draw should be the last of the season and EIA should report that stocks grew by 26 bcf for the latest period. If the market does not take this opportunity to break technical support it may be that a major bottom is in place and the decline from the 2008 highs is completed. We are not ready to concede that quite yet.
 
 
TECH TALK

The 10-day moving average has moved under the 60 day which shows the market's overall weakness, but the higher settlement last night failed to ignite a buy signal. The 10-day moving average should dip below the 60-day by tonight which is another bearish sign, albeit a weak one, the fact that the moving averages are converging shows that a consolidation is underway. If prices do consolidate above 4.00 then a solid rally may begin, but slowly. A settlement above 4.50 should signal a trend reversal.

source: KilduffReport.Com