IntroView
 
If the debt ceiling debate had faded comfortably from your memory, the scheduling row over the President's job speech is a jarring reminder of what the markets are in for beginning next week. The political divide is great, and the markets are captive to it. The economic data points continue to deteriorate, and jobless claims, later this morning, along with the August employment report, tomorrow, will likely highlight the economic slide. Eurozone data is also weakening, which bodes poorly for the one bright spot in the US economy -- exports, which primarily go to Europe. In the coming days, we will see how the Fed and the government will wind their way toward more easing and stimulus. The effectiveness of it all is debatable. If Tea Party dogma wins out, and nothing is done, it will be equally as interesting to see how that approach ends up serving us and the re-election prospects of those who serve. The jobs data could be the knockout blow for the markets. The plunge in consumer confidence is coincident with employment and employment prospects, and tomorrow's job creation could be near zero.
 

Petroleum Markets
 
Crude oil prices continue to falter just above the 50% retracement of the late July-early August sell off so we will hold with our contention that this is a rejection of the counter trend rally. Why not? There has been no appreciable change in the underlying political/economic structure that brought it about in the first place. The recent data from global economies is acknowledging that the sluggish growth pace more likely will continue. US consumer confidence slipped to the lowest level in two years, European economic confidence plummeted the most since December, 2008 and the eurozone's unemployment rate unexpectedly rose to 10% in July from 9.9% a month ago. Additionally, expectations that oil production in Libya might soon be resumed have eased concerns over output tightness. Jobless claims later today and the monthly jobs report tomorrow are not expected to spread much cheer about energy demand growth either.
 

Petroleum Tech Talk
 
The market violated 89.00 resistance again yesterday, but also, again, did not settle above that mark. That, and price movement so far today, represents another rejection of the 50% retracement of the move down to the mid-70s, earlier in the month. The hesitant recovery to 89.00 took out 89.54 yesterday, its highest level so far, and this should have turned the bias positive, but failure at 89.61 support turned resistance will keep us bearish as long as this resistance holds. Today's reversal through the pivot at 88.67 justifies this conviction. A break below weekly support at 82.17 will create an overwhelmingly bearish picture, which should keep the drive to the 75.71 low alive with an eventual target of 70.00. Still, the ascending triangle, defined as the rising trend-line off the 75.71 low to the relatively flat upper boundary suggests an upside breakout and short positions should be stopped out just above.
 

Natural Gas
 
Granted, this is the season of highest probability for hurricane activity, making participants unusually sensitive to meteorological disturbances in the tropics. No one wants to be short into a long holiday weekend either. But the market was oversold and due for a bounce after hitting new lows earlier in the week. We have been calling for it and the lemmings did not disappoint. Yesterday saw the biggest one-day gain in nearly seven weeks, and at 5.8%, the biggest two-day run in three months. This should be the extent of it. Prices should return to the defensive without a hurricane to disrupt Gulf supplies, particularly with summer winding down, production at record highs and demand lagging in a weak economy. Focus will now be on EIA, which reports later on supplies. We think it will show another 68 bcf was injected to stocks.


Natural Gas Tech Talk  
 
Prices have broken below our descending triangle, as predicted, into a well-defined trend channel extending back to the mid-June highs. Yesterday's action violated that channel but weekly and monthly charts still show the market well below the 13 day EMA. One of the most basic signals technicians use is a new low with a higher close and that is what price action produced Tuesday, which materialized with Wednesday's rally. Prices have been probing the downside after trading mostly sideways during the previous three weeks and the new low on Tuesday is pointing to exactly where the market should go once this bout of short-covering concludes. A front-month close above key resistance in the 4.14 area would be seen as supportive and suggest more upside. Key support was pegged at the March lows of 3.80 and 3.731.
 

source: KilduffReport.Com