ALERT: USA LOSES TRIPLE-A RATING; S&P LOSES MORE THAN THAT.
 
PETROLEUM MARKET

The much feared credit downgrade of United States sovereign debt came late Friday. The timing was purposeful said S&P, in order to do the least amount of damage to the global markets. Whatever this verdict by S&P represents, the psychological damage is being played out: Gold has soared over $1700 per ounce, the Dow is down 250 points, and crude oil prices are down over $3.00 per barrel. Oil prices are down $30 from the high seen in May. The stimulative effect of lower gasoline prices should help consumers weather this latest bout of anxiety over the economy. Friday's July employment report was supportive coming in over 100k versus whisper numbers indicating net job losses of 50k or more. The jobs number felt like the only positive economic surprise of the week. But, auto sales and retail sales were decent, as have corporate earnings. Prices are likely to head lower on the continuing economic concerns and the negative mood in the USA after the debt ceiling debacle. We are targeting $77 per barrel at this point. Longer-term, supply issues persist in the Libya and the North Sea that will engender buying and foster an upside bias for prices in 2012 and beyond. A break below $80 (and to a degree here) represents a buying opportunity. --John Kilduff
 
 
TECH TALK

The down slope remains extreme, and we are seeing the start of some consolidative action near the recent low of 82.87. $84 represents overhead resistance, with the range between 84.00-88.00 as the upper bound, and 84 down to 80 being the lower bound. It has been a week's worth of very wide bars, so further choppy action should be expected. The major moving averages are well above current levels, so we will have to wait for them to catch up to get some insights. Prices challenged $70 per barrel last August as well and took off from a reverse head-and shoulders formation that was completed in October. For now, the two bands mention above represent the likely ground to be covered in the short-term. The probable downside target for this move is 75.40, and 77.00-77.50 should be seen before the month is out. -JK
 
 
NATURAL GAS

There is no quarter from the fallout from the S&P downgrade. Gas prices are down another six cents, below 3.90, adding to the large losses of last week. The recent injections, which have come in above expectations, despite broiling heat, give a somewhat fundamental rationale to the decline. Recent economic data, and now the further deleveraging in the capital markets, generally, has gas being collateral damage in the overall selloff. Certainly, industrial demand is a component of the demand calculation for gas prices, and the recent data points have disappointed almost uniformly with the exception of Friday's employment report. The psychological damage from the downgrade will show up in consumer sentiment and other survey work. These will likely push prices even lower. Fears of a double-dip recession may become self-fulfilling, and prices have gotten all the help they could hope for from the extended heat wave in the south and southeast. $3.50 looks more likely before we $4.00 again. -JK
 
 
 
TECH TALK

The chart remains bearish even after presenting overwhelmingly bearish late last week. There has been sufficient follow-through from the break below 4.064 to install 4.00 as significant overhead resistance, with 4.064 being the next level. Prices are likely to test 3.80 early this week, which get prices back into last year's familiar congestion zone between 3.60 and 3.80. Ultimately, a longer-term move lower has us projecting a downside target of 3.369. The daily bars have been wide, so violent corrective episodes should also be expected, which would warrant smaller-than-usual position sizing. -JK
 

source: KilduffReport.Com