IntroView
 
Anxiety levels are soaring, as evidenced by gold prices, which are up another $50 per ounce, today, closing in on $1900. The economic data points continue to worsen. Bank stocks in the U.S. -- Bank of America, Citigroup -- were hammered, again, yesterday. B of A has announced layoffs of upwards of 10,000 people. UBS is the latest European bank to deny rumors of liquidity issues. There is more equity market selling this morning and oil is below $80. Increasingly, the tale of the tapes will turn recession expectations, which are growing, and, with consumer confidence so dire, it is becoming a self-fulfilling. Look for a rough day ahead.
 

Petroleum Markets
 
Media outlets keep referring to the selling as "panic." The horrible truth is that it is much more orderly self-fulfilling than the previous bout of selling last week. There now seems to be a mind-set that has descended on participants that has policymakers completely impotent in dealing with current conditions and concluding that recession, or worse, is inevitable. The cadence of negatives is growing louder and louder. Yesterday brought more bad news: Philly Fed reported factory activity plummeted in August, the number of Americans claiming new jobless benefits rose last week and consumer prices increased at the fastest pace in four months in July, existing home sales unexpectedly dropped in July, as cancellations of pending contracts continued to depress buying activity and on and on. About the only hope the market has today is with the NYMEX open outcry session, where traders may conclude that prices have fallen enough and flatten out before the weekend as there is no significant data on today's calendar. But selling should continue in earnest next week. We shift our focus to the October contract today, ahead of September expiration on Monday.


Petroleum Tech Talk
 
Intraday bias in crude oil stays decidedly negative. The rejection of the 50% retracement, off the lows last week, has opened the possibility that fresh lows may be reached as early as today. A break there will resume the whole decline from 114.83 towards 70.00. There may be short, sharp rallies with the market quite oversold, but they should be contained by 89.00 which is now major resistance. There was a net fall in open interest over the Sept/Oct spread on solid volume showing more length being closed. Commitments report tonight should be interesting.
 

Natural Gas
 
Consequent to a bearish EIA reading, showing injections of 50 bcf into storage, prices dropped to their lowest level since mid-March. While the report hewed relatively close to expectations, it was still bearish to last year and the five-year average and reminded that this is a well supplied market. The mercury may kick up a bit next week but highs in the larger consumption regions mostly in the low- to mid-80s were not likely to stir much demand. The peak of the storm season in late August and September is just about here, and while a tropical wave in the western Caribbean does not look like a serious threat to Gulf of Mexico gas supplies, it will make participants wary and discourage aggressive selling ahead of the weekend. Still, momentum remains with the bears given the familiar imbalances of ample inventories, record production and a struggling economy.


Natural Gas Tech Talk  
 
The breach of 3.855 did not generate enough momentum to carry through to settlement, and this may prove unnerving enough to market bears to initiate a short-covering rally after steady selling over the last five sessions. A head and shoulders pattern is emerging with the head at recent highs and the neckline at about 3.905. A break there, on settlement could also bring about the tumble through familiar support at 3.60-3.80 that we have long anticipated. While decent interim support was seen in the 3.80 area, particularly with tropical activity picking up, a front month close below key support at the 2011 low of 3.731 from early March could drive prices into the 3.40s, based on a swing measurement of the recent sell off from late July.
 

source: KilduffReport.Com