IntroView

Global Equity markets are higher on even higher hopes for a resolution of the euro zone debt crisis. The latest developments has Arab sovereigns coming to the rescue of Greece, and renewed talk about a European TARP. Alas, it does not end. And what is striking are the market lurches up and down on the ebb and flow of the outlook for a way out of the crisis. Hyperbole abounds with George Soros calling a a European Treasury or risk a depression. It's this all-or-nothing sentiment that is generating the volatility. While we have nothing specific, the weekend could hold more surprise, so position yourself accordingly into tomorrows close. During a crisis like this, sub-plots emerge, and today we learn of yet another rogue trading scandal: UBS has a $2 billion loss from an employee in their ETF unit. UBS seeks to assure the market that the risk management systems have now been repaired. Weekly jobless claims will likely eclipse 400k later this morning, which will be a reminder of the difficult economic conditions currently upon the US economy.
 

Petroleum Markets

Even though EIA reported that crude oil stocks took the biggest weekly fall of 2011, taking inventories to their lowest level since February, market participants shifted focus to rising product stocks. The unexpected rise in gasoline last week came as a report showed that demand for the motor fuel fell to an eight-year low this summer. Average prices almost $1.00 higher per gallon over that period is particularly demonstrative of the consumer resistance that we have been highlighting. But with utilization rates at only 87% of capacity that surplus may be soaked up quickly. Still, investors remain nervous about oil demand prospects following reduced estimates because of a weaker economic outlook. Hardly surprising following stalled retail sales in August and data showing zero growth in employment earlier this month, raising concerns about the economy relapsing into recession.
 

Petroleum Tech Talk

Crude oil is testing the top of the recent 85.00-90.00 range. The recovery from the 75.71 low has been steady but choppy, and so, appears corrective in nature and is still in progress and with 83.20 minor support intact. But the inability to post another new high yesterday hints at this inherent weakness even though the market is well above the 13-day EMA for three days in a row. We still expect the upside to be limited below 100.62 resistance and bring resumption of fall from 114.83 eventually. A breach of 83.20 minor support will flip bias back to the downside for retesting 75.71 low first. A break of 100.62 resistance though will indicate that fall from 114.83 has completed -- until either event we will keep the bias at neutral.


Natural Gas  

Gas prices edged closer to breaking out of the recent range. Technical features again dominated as the fundamental imbalance of a well-supplied market laboring under economic constraints and mild weather limit demand. Open interest show that the market has again become laboriously short. The presence of these positions, established at the lower end of a market that has declined steadily from over $6.00 in early June, created a grossly oversold condition. Any market that has every reason to move in a particular direction and subsequently does not usually presages a reversal. Still, market tops since mid-August have been successively lower, so our bias will remain neutral until a new high is posted, even though a bottoming formation is becoming increasingly obvious. Until that occurs, all that may be taking place is the elimination of weak shorts. A sustainable rally requires the establishment of new length and, as yet, there is no evidence of that. In the final analysis, this may be just a reaction to a coming drop in the mercury in the high consumption regions, but temperatures in the 60s in Chicago and New York are hardly compelling.


Natural Gas Tech Talk     
 
Natural gas continues to stay in range of 3.78/4.13 as consolidations continue. Intraday bias remains neutral and more sideways action could be seen. The market has extended well above the 13-day EMA and the day's pivot of 4.031. Our bias remains neutral as we wait for a settlement break of 4.13 resistance, which will argue that the fall from 4.983 is over and stronger rebound should then be seen to 4.612 and above. If 4.983 resistance is taken out decisively the next target will become the 6.108 high from early June.

source: KilduffReport.Com