IntroView

Equity markets regained all of their losses from the S&P downgrade with yesterday's advance. Although, the early read this morning has them back down over 1%. More volatility awaits, as the eurozone leadership possesses, yet, another opportunity to disappoint. The markets continue to ignore some poor data points, the New York State Empire Manufacturing Index showed further contraction and caused barely a ripple. Housing starts later this morning will test this trend.
 

Petroleum Markets

Crude oil prices briefly moved above 88.00 in the final moments of yesterday's NYMEX sessions, as latecomers to last week's party, threw in the towel. Still a net decline in overall Sept./Oct open interest shows that new longs are not entering, a reflection, not only of growing margin calls in other markets but also pointing to questionable demand, going forward. As a European debt crisis summit is about to convene in Paris, German Chancellor Merkel will have a difficult time selling and aggressive role for Germany in any European bailout to voters as the country's Federal Statistics Office reported that GDP, adjusted for seasonal effects, rose a paltry 0.1%, percent from Q1. Additionally, a report today may show housing starts and building permits in the US fell in July which may prevent oil prices from rallying further, but tomorrow EIA may report that crude oil stockpiles declined to a five-month low, further complicating directional decisions. Finally, another conundrum to add to the analysis is the Conference Board's report that, growth in China is slowing "significantly." Finally, the media is giving a lot of space to Warren Buffet's comments to Charlie Rose last night that he bought lots of stock "on sale" last week. Mr. Down-Home-Regular-Guy is glad to share his thoughts with everyman. Wonder why? Anyone with $40Bn definitely has an agenda. He want you to join him so his shares appreciate. Thanks Warren!
 

Petroleum Tech Talk

The recovery from the 75.71 low appears to have slowed. Why not? The 50% retracement of the recent leg from 100.63 to 75.71 is 88.16. There is minor support all the way back at 81.03 and interim support at 86.78, already tested today, 85.50 and 82.82. A break of 81.03 will retarget 75.71, and if that is reached it will signal a resumption of the whole decline from 114.83 towards 70 psychological level next. On the upside, break of 89.61 resistance is needed to be the first signal of bottoming at recent lows. There was a net decline of about 20% in open interest over the Sept/Oct contracts while prices rose, which shows no new net length was being accumulated. The market is right at the 13-day EMA at 87.94, but still well below on weekly and monthly charts.


Natural Gas

Prices were dragged down on Monday, falling below the psychologically important 4.00 level as moderating weather forecasts and concerns over rising production weighed. While posting a low of 3.951, the lowest price since August 11th, the market could not manage a settlement below 4.00. Moderating summer may suggest weakening demand, but production proceeds apace. The simple fact is, the market has a sufficient supply of gas and this should be evidenced by rising weakly injections as the thermometer falls across the Midwest. However, the end of August is when attention begins to turn in earnest to hurricane season in the Atlantic Ocean. Right now, National Hurricane Center is tracking three weather systems in the Atlantic Ocean. Two storms with under a 10% chance of becoming tropical cyclones in the next 48 hours are moving west, while Tropical Storm Gert is expected to turn east of Bermuda and head back out to sea across the North Atlantic. Participants will be particularly sensitive to the movements of these and coming disturbances, as they may prompt short-covering rallies.


Natural Gas Tech Talk  
 
The immediate bottom at 3.855, posted last week, remains undisturbed. While the market did probe below 4.00, it could not manage a settlement below that mark. Participants' reticence shows some lingering technical strength, despite the usual fundamental weaknesses. The bias is still to the downside though with resistance at 4.23 and if it holds subsequent tests should usher in more selling. A push below 3.855 should embolden sellers to push beyond making a settlement below 4.00 more and more likely. A break to new lows will project 3.692 as a possible target based on a reflection of the move down earlier from 4.983 to 4.064. An upside move through first resistance at 4.23 will turn focus back to 4.612 instead. Currently, the market is below today's pivot at 4.012 and the 13-day EMA at 4.07.

source: KilduffReport.Com