ALERT: S&P RAISES ALARM BELLS, MARKETS SLUMP IN RESPONSE.
 
PETROLEUM MARKET

S&P put the US AAA credit rating in jeopardy with the suggestion yesterday that there was a good chance that it might issue a downgrade in the future. Equities reacted negatively as did commodities,  gold struck a new record high of 1498.6 before closing at 1492.9, up +0.46%, as sovereign and debt uncertainties drove demand higher. Oil plummeted with the front-month crude contract falling for the first time in 4 days. OPEC commentary demonstrated the cartel's concern that high oil prices would negatively effect world demand. After confirming the country has lowered oil production in March, Saudi Oil Minister Ali al-Naimi warned that global economic growth may remain weak, recovery slow with unemployment  at unacceptable levels. Spending on oil imports could represent a significant economic burden for many import dependent countries at current price levels. We think this could possibly tip the global economy back over into recession, and that this view is spreading, which will subsequently bring prices lower, possibly below 100.00, very soon.
 
 
TECH TALK

110.24 resistance remains  intact,  as does support at105.3. A new low for the front month has been struck at 105.30 but prices have since rebounded, although still lower on the session. A settlement below the 106.50 area will bring an assault on the next prominent low near 101.00. A breach there will target 98.00 area, a prominent low prior to the breakout of hostilities in Libya. Another settlement above 110.00 would be required to target highs above 114.00 but this is becoming less likely, particularly with statements emanating from OPEC officialdom.
 
 
NATURAL GAS

After posting a new high for this particular leg of the move at 4.27, prices fell, reacting to negative outlook contained in an S&P report. While the rating agency reaffirmed its top AAA rating it did warn of the difficulty in trimming the deficit. Still the structural imbalances of mild weather and ample supply will plague the market regardless of agency warnings on debt or policy choices. We are still at the confluence of waning heating demand and the onset of cooling demand. There will be sporadic locales that will ramp up either of those during the next several weeks, but it will not be material enough to significantly affect the over 1.6 Tcf currently stored. This is the core rationale behind or conviction that there will still be an assault on 4.00. But the longer it takes, the more the current lows will look like a major bottom has been installed. It will require a settlement over 4.50 to convince us.
 
 
TECH TALK

The market continues to leak momentum near 4.20. While yesterday's fall from the highs appears to be influenced by an exogenous event, it finished lower, nevertheless. Conversely, downside momentum dwindles near 4.00, and another event may be required to push through. The convergence of the moving averages shows the effect of range trading, and consequent front-end weakness. The movement of the 10-day below the other averages confirms this.

source: KilduffReport.Com