IntroView

You may recall an earlier market phase where the pundits advised us that the market prices were "data dependent" -- hanging on every economic statistic and reacting significantly in due course. The markets are now euro zone dependent, and watching Euorpe sort their through the latest iteration of sovereign wealth debt threats is like watching euro zone rehab. They have a problem; they realize they have a problem; with all earnest, they say that they want to do something about their problem; and then they do, until they do not. That was the past two days, with market gleeful over various plans rolled out to deal with the crisis, only to see the market's heart sink on the word of a single German technocrat who said there would be no leveraging of the rescue facility. Have another! We disect the fundamentals here often, and we will continue to do so, in anticipation of the next market phase. For now, to discern short-term price movements, stay close to the debt situation, as it does seem to be nearing an end-stage. On the horizon, we are expecting a negative jobs number for September, and the data dependency will likely return once the poor employment comes into full view.


Petroleum Markets   

Coming off last week's selling pressure, crude oil had worked up an oversold condition. With that as a backdrop and a late breaking FT story that unanimity among the relevant EU policymakers was not forthcoming, the markets' confidence in the EFSF looks overrated and overoptimistic. The late session run-up and subsequent selling was indicative of a program trading by long-only index funds rather than a sentiment shift. Equities rose and commodities gained, with gold also shaking off four days of declines. End-of-quarter and technical buying also helped support. API reported that stockpiles at the Cushing hub fell by 1MM bbls, while distillate inventories slipped. The market will next be looking for data from EIA, later this morning. Volatility for the rest of the week will be influenced by reportage on the European huddle and month and quarter end position shifting than solid fundamentals.


Petroleum Tech Talk  
 
Crude oil's recovery from 77.11 temporary low might extend further. Our bias will remain for more downside though until 90.52 resistance breaks. The decline from 114.83 should resume and a break below 77.11 should send crude oil through 75.71 support to the 70.00 psychological level next. A break of 90.52 resistance is needed to invalidate this view. The market remains below the EMA on daily, weekly and monthly charts and shows the market's inherent weakness as does the tepid rise in the momentum oscillator measuring yesterday's rise.


Natural Gas   

Gas rallied again yesterday, in sympathy with global markets responding to a sense of relief that European policymakers were finally going to address the debt crisis in a substantial way, as well as short-term weather-related demand and position adjustments ahead of today's expiration of the October contract. The rise followed an 8.1-cent gain Monday, with the combined increase nearly erasing the loss of 12.8 cents over four days last week, when prices settled at their lowest level since Oct. 27. The successive gains were the first since gas last topped the 4.00 mark, which was reached as storms temporarily disrupted much of the Gulf output. But with the peak of hurricane season passing, no current threats on the horizon and the ongoing imbalances of record production and a struggling economy 4.00 now seems a difficult level to overcome. At least for now, when it seems unlikely that a significant rise in consumption may appear for six to eight more weeks. N.B. October futures expire today.


Natural Gas Tech Talk   
       
Despite the 8% slide in the previous seven sessions, the market remains range-bound. However, a flag formation is now appearing which began to form after the initial strong drop that began the trading week. The bounce from the 3.80 low still traces out in the established range, but its placement near contract lows may provide enough psychological support for another breakout to the upside. However, as we have seen before this will probably work out to be a continuation pattern with significant downside remaining for a test of 3.255. Resistance at 3.90 level has, so far, capped the move off the lows, and a break above could generate enough upward momentum to carry past 4.00.

source: KilduffReport.Com