IntroView

Markets are marginally lower THIS morning, awaiting the curtain to come up on the Fed decision at 2:15PM. This is the main event. The Greek situation has come off the boil for now. Follow-up meetings next week with ECB technocrats and a Greek-German Prime Ministers meeting announced for September 27th have the markets thinking that Greece and the euro zone will live on. Part of the selling has to be the troubling downgrade of the global economic outlook by the IMF, yesterday. They went as far as to implore policymakers to embark on aggressive pro-growth policies. The Fed's expected portfolio rebalancing appears to have been priced into the markets, at this point. The effectiveness of the move is being roundly debated -- that is praised and criticized. It's certainly worth a shot. With political Washington dug in for the 2012 elections, the economy will not get any help from any quarter. Corporations will use the uncertainty as an excuse to pile up the overseas cash horde, hoping for a more favorable environment in 2013.  The markets may react violently this afternoon to any unexpected news from the Fed meeting; trade accordingly.
 

Petroleum Markets   

Crude oil has so far today displayed an inconclusive pattern within a tight range despite the IMF's warnings yesterday. The market leaned towards the downside during the NYMEX session yesterday when IMF warned of the possibility for the US and Europe to slip back to recession. The y project global growth to slow to 4.0% this year compared to 4.3% earlier, also lowering US growth expectations to 1.5% from 2.5% in June. The warning from the IMF for the deteriorating situation in Europe and the downside pressure that will result if they failed to contain the crisis offset some positive signs of over Greece, especially after a hopeful second day of talks regarding the next tranche of aid. Weakening demand prospects are keeping crude below the critical $90/bbl mark. All eyes are on the Federal Reserve today looking for policy adjustments that might support the recovery. API reported an unexpected increase in crude oil inventories yesterday. While we expect EIA to report a modest build as well, most expect another drop. Following on the previous week's strong draw of 6.7MM bbls, another decline in reserves will surely support crude yet the effect is starting to wane as pressure from the hurricane season begins to abate.


Natural Gas  

Mild shoulder season weather combined with overproduction and a weak economy keep a lid on prices. Add to that, expectations for rather sizable builds to stocks over the next several weeks, the conclusion of the peak hurricane season and a picture of overwhelming bearishness is produced. Naturally, this begs the question, why have prices not moved even lower? First, a a low-pressure system in the central Atlantic, which most computer models show heading into the Caribbean. Second, the calendar clearly shows that real heating demand is moving closer. Third, and most important of all, it would appear that speculative interests are loading up short positions creating an oversold condition. Still, the ledger is still over weighted to the downside and our view is for lower prices unless EIA dishes up a surprise tomorrow. Look for the report to show 91 bcf has been added.  


Natural Gas Tech Talk        
 
The market loses some downside momentum after dipping to 3.743 but we will keep the bias bearish for the time being because fundamentals and technicals are pointing in the same direction, and this combination usually produces strong directional moves. Resistance at 4.099 remains intact after the recent run up so the current decline should continue. Below 3.743 will target 3.255 support next. However, medium term range trading could add to another growing oversold condition that will only be negated by posting a fresh low. On the upside, we need to see 4.983 resistance taken out decisively first before confirming completion of the consolidation from 6.108. Before that, we continue to favor another fall eventually to 3.255.

source: KilduffReport.Com