IntroView
 
Gold broke through $1900 an ounced, yesterday, and promptly failed. This has occurred at lower levels, several times, earlier this year, most notably at 1600. We are maintaining are our $2500 call, and another thrust higher could come as a result of Fed Chairman Bernanke's speech on Friday from Jackson Hole, Wyoming. The equity markets rallied remarkably, yesterday, on growing consensus that the Fed will do something to combat the economic slowdown. Whatever your personal view of these efforts, as a student of the mistakes of the Great Depression, The Fed Chairman is a devotee of ultra-loose monetary policy as an antidote to the creeping economic malaise. As we have experienced, equity prices will rise, but so will commodities. But, since commodities, for the most part, fall within the food and energy space, they are expendable. Libyan oil will return to the market rapidly, so the effects of QE3, this time, will not be exacerbated by the outage and will likey be kept in-check to a degree. As we forewarned, of all the market axioms to heed, the greatest is not to fight the Fed.
 

Petroleum Markets
 
Crude oil rose again on Tuesday, garnering support from several influences. Initially, the euro benefited at the expense of the dollar. A further boost was received from manufacturing data from China and Germany that was less gloomy than expected. Another force majeure in Nigeria was declared after an attack on a pipeline. Weaker US home sales in July was followed by a posting of the day's lows, but market participants later parsed this news as further justification fro more Fed stimulus and, accompanied by a surging stock market, reversed to session highs. Late session reports of an earthquake boosted prices on fears of oil infrastructure damage, which later proved unfounded. Post-settlement gains were pared after last night's API report showed, not only rising Cushing stocks, but swelling inventories of gasoline and distillates. This amplified MasterCard's report that US retail gasoline demand fell again last week despite another drop in pump prices. German business confidence falling to the lowest level in a year has emboldened sellers again this morning.
 

Petroleum Tech Talk
 
Oil extended its rally to 86.39 yesterday, leaving the previous high at 89.00, a rejection of the 50% retracement off the recent lows, intact. The intraday bias remains to the downside. The market may receive some support off a possible rising wedge formation as long as trading is contained within the 86.00-89.00 resistance. But a break of 85.00, already today, suggests that downward momentum has been revived. A settlement above 89.00 is required though to flip the bias back to positive, as it will suggest that the market may have bottomed and now targets recent highs near 115.00. We will stay with our lower view until 89.00 is posted on settlement.


Natural Gas
 
Gas prices rebounded from a five-month low on Tuesday, as expected temperature readings for the Southern states were revised upwards, prompting some short-covering. Late in the session, reports of an earthquake in the Northeast initiated fears of nuclear outages which sparked more buying. Indeed, seven nuclear plants on the East Coast declared unusual events, the least serious of four emergency notifications, according to the Nuclear Regulatory Commission. What impressed us is that even though the market was vulnerable to a short-covering rally, the addition of a potentially grave event could barely generate enough momentum for a brief peek over 4.00, eventually settling below. This is a clear demonstration of the market's inherent weakness.
 

Natural Gas Tech Talk  
 
There is no change in the technical outlook for natural gas. Further decline is expected with 3.996 minor resistance intact. Using the move of 4.983 to 4.064 as a measure, and calculating from 4.612 , a 100% projection produces a target of 3.692. The inverse, a settlement above 3.996 minor resistance will turn bias neutral and bring recovery. But break of 4.143 resistance is needed to confirm short term bottoming, otherwise, our outlook remains cautiously bearish with medium term range trading. We still favor a fall eventually to 3.255 and below once 3.692 is taken out. The neckline of our head-and-shoulders formation was breached but settled lower.

source: KilduffReport.Com