IntroView

The markets now await the outcome of the two-day Fed meeting, underway in Washington. Speculation is rampant that a shift in the Fed's porfolio duration and an elimination of paying for bank deposits will be the result. Something better give or it will be a dark afternoon. We say this because the stimulus plans put forth by the President have given way to the 2012 election cycle, and the euro zone debt crisis is playing out like a long slog to a bad end. Right now, the Fed is the only entity capable of throwing a Hail Mary pass. The markets will be on the edge of their seat to see if a completion ensues. The downgrade in the economic outlook by the IMF should provide cover -- or in keeping with the theme here -- a screen against those who oppose their efforts on policy grounds. For today, euro zone hope floats the euro, sinks the dollar and lifts oil. Gold is to be bought on the dips on its way to $2200.
 

Petroleum Markets   

Crude futures fell on Monday as concerns about the euro zone debt crisis fueled investor fears about demand. The falling euro benefited the dollar which also weighed on oil. Prices are a bit higher this morning despite a downgrade of Italian debt. The market is careening from event to event. The next one will be if funds are disbursed for the next tranche of the EU's bailout of Greece. Policymakers are in a bind. The can't just pull the plug on Greece as political viability with their respective constituencies wanes. The choices open to them are either bad or worse. There is no way out short of an entire restructuring of the entire European debt architecture. This will fall to France, where banks are dangerously under capitalized and Germany, where the citizenry is growing increasingly resistant to the whole idea. It can only get worse, unless an actual fiscal union is formed which would entail a complete rewriting of the EU's charter. Oil demand growth under these conditions, fugettaboutit!


Petroleum Tech Talk  

Crude oil put up a another lower high and a lower low. Yesterday's sharp slide, with the break of 85.00 minor support argues that the corrective rise form 75.71 was completed at 90.52. Intraday bias remains to the downside as a consequence and targets support at 83.20 first. A break there will further affirm this case and target a test on the 75.71 low. On the upside, break of 90.52 is needed to confirm resumption of rebound form 75.71. Otherwise, we'll stay cautiously bearish now.


Natural Gas  

Bargain hunting after posting a new low characterized price action in gas yesterday. Momentum though, was unable to carry below the year's low of 3.731from last March. The imbalances of ample supply, overproduction and a faltering economy still plague the market, making it difficult to see how a buying can carry very far, particularly with weather somewhat demand neutral right now. Temperatures around the country are such that near term demand should remain limited. The Commitments report, through last Tuesday, shows that speculative interests saturated open interest with short positions confirming the covering nature of the two-day price spike. As the calendar draws closer to real heating demand in the high consumption regions, these weak shorts' patience will grow quite thin, but this will be offset by the reality of the overwhelmingly bearish fundamentals, and expectations for a sizable build on Thursday.
 


Natural Gas Tech Talk        

The market keeps posting new lows, interspersed with short, sharp buying spikes. The new low yesterday failed to gather momentum as traders snatched profits, and so, the March low of 3.731 held, but the break of 3.78 support confirms resumption of recent decline from 4.983. The market now needs to dip below 3.731 to generate follow-on selling. Intraday bias remains on the downside and further decline should be seen to 3.255 support next. On the upside, above 3.895 minor resistance will turn bias neutral and consolidation will resume. But upside should be limited below 4.099 resistance and bring another fall.

source: KilduffReport.Com