IntroView

Equity markets rebounded, yesterday, and down net-net about 3% for the week. For once, the protests of CEO whose company was under siege and stock price hammered was telling the truth. Societe Generale is alright, the source of the distress, London's Daily Mail, issued a rare apology for not properly sourcing the story. The markets also took solace from apparent by the leaders of France and Germany to work on a broader resolution of the European debt crisis. Long-dated US Treasury bond sold off hard, yesterday, and mid-day auction was poorly subscribed. It may be telling that this did not spook the markets and cause a sell-off. Futures are little changed this morning, and it looks we will finish the week in an orderly fashion.
 

Petroleum Markets

Oil prices rallied further, yesterday, partly due to an improvement in weekly jobless claims, which finally dipped below 400k. Given the amount of announced layoffs, it is difficult to see this trend continuing. Bank of New York was the latest, yesterday. The fickle equity markets rebounded as concerns over Europe and the health of French banks eased. This rejuvenated energy prices, which have held steady-to-higher during the gyrations of the S&P over the past two sessions. There are some geopolitical rumblings, as well: South Korea fired a shot at North Korea, and government forces in Syria opened fire on a large number of protestors earlier today. We would look for prices to continue to firm for now. Retail sales are expected this morning to be fairly positive, which will likely help add to gains. Having digested the S&P downgrade, the Fed rate decision, the Soc Gen insolvency falsehood, and newly instituted short-selling ban in several European markets, the markets are holding up remarkably well... or not. The US austerity measures will begin to hit. Public sector employment will be especially affected, as a great deal of the stimulus went to directly to States for their budgets. Employment levels and trends are paramount to our analysis. The markets are confused and scared. There is more upside in the short-term for crude oil, but be wary and prepare for another bout of selling.    
 

Petroleum Tech Talk

The death cross has come to the oil price chart. The 50-day moving average has crossed under the 200-day moving average, a bearish formation. Despite this, prices are continuing to rebound from the deep sell-off, giving the spike down to 75.17 an increasing blow-off bottom look. Our initial upside target continues to be 87.62: the 50% retracement from the high on July 26th of 100.62 and the recent low of 75.17. The key upside level to retake is 90.00, which would enable a return to the broader 92-98 range. Prices are now above the 80-84 range, which was the extended zone of congestion from late September to December of 2010. On the downside, $80 continues as a key support level with Monday night's low of 75.17 as representing a critical support point. A break of 75.17 would set us up for move to the 71.30 area.


Natural Gas

Natural gas prices rallied over 10 cents upon release of the weekly inventory report, which showed a paltry injection of 25 bcf versus consensus estimates in the mid-to-upper 30s. The year-on-year deficit is now 7 percent of 197 bcf and 3 percent below the five year average. The heat in the South is keeping local hub prices strong with a fairly wide premium to futures. This may ne the last gasp for the bulls, however, as temperatures moderate. Even the looming bout of above-normal temperatures for the Northeast will not be scorching, as normal daytime highs ratchet down into late August. There continues to be several very early stage tropical formations to monitor, but they cannot be considered any kind of threat at this point. There may be spill over buying from the optimism in the overall markets, but 4.15 and higher looks to be a good sale level.


Natural Gas Tech Talk  
 
The gains off Monday's low continue to build, and are creating an uptrend channel that appears to target 4.20. Prices are above the 13-day MA of 4.093. If yesterday's high of 4.149 can be bested, look for 4.18 as the next upside test. Beyond 4.20, look for 4.230-4.234 would be the next upside of congestion. If prices break back below $4.00, support is seen at 3.979-3.972. Next support is seen at 3.915. The prominent low remains 3.855 and break of that argues for further declines to 3.80, 3.73. Ultimately, a longer-term move lower has us projecting a downside target of 3.369.
 

source: KilduffReport.Com