IntroView

And then there was light. Yes, late yesterday, markets turned, once again, on reports of rescue plan for euro zone banks. Germany's equity market is up over 3% on the possible resolution -- none of which is official and few details exist. The first of the jobs data are out and ADP is showing 91,000 new jobs created. The accuracy of this number, as it relates to Friday's number has been poor. We still expect a jobs number near zero, and if it shows job losses, this will be the catalyst for another leg lower. Housing and unemployment remain at the core of the issue, and housing will not improve without a jobs recovery. The sell-off in US bank stocks is also disturbing. We keep being told that US bank balance sheets are much stronger now than in 2008. Yet, Morgan Stanley, Bank of America, and Citi are trading as if Dick Fuld was still in his office on Broadway waiting for Hank Paulson to return one of his multiple calls. The rebound looks more like a bounce than a trend, at this point.
 

Petroleum Markets      
 
The dramatic reversal after the open-outcry session ended, certainly got participants attention. Unlike Friday and Monday when the market kept posting new lows right up to 5:00 o'clock, yesterday it was putting up fresh highs. A late story, by the Financial Times noted that European policymakers were considering a plan to recapitalize the banks and this is exactly what the market requires. The sell off was based on the premise that Armageddon was at hand and the subsequent economic chaos would substantially hit demand. While no specific plan is forthcoming, the topic of recapitalization, at least being considered, is significant. One way or another, the Greek debacle is coming to a head. Is this a reversal? Has the downturn that began in May over? Maybe not quite yet. Skepticism will certainly dominate until a plan is formulated and therein lies the rub. So far, the Europeans have only decided to meet to plan another meeting. At any rate, at least the hard choice is being considered, and that is a huge step.


Petroleum Tech Talk    

Crude oil lost some downside momentum after a fresh low at 74.95 was posted. A new low and a settlement near the day's highs is usually an early sign of a reversal. For that reason we will change our bias to neutral and wait for confirmation one way or the other. Upside recovery should be limited below 84.77 resistance and, if it is, bring another wave of selling should ensue. Below 74.95 will extend recent decline from 114.83 to 70.00 psychological level next. Our target remains support at 64.23. On the upside, break of 90.52 resistance is needed to invalidate this view, but for the moment it is probably prudent to move to the sidelines and wait to see how this move shakes out. A counter-trend rally, or a full blown reversal? Too early to tell.
 

Natural Gas  
     
Gas prices notched fresh lows again yesterday, probing through the important congestion zone of 3.80-3.60. However, the market subsequently rallied to the day's highs. It looks like another short-covering rally is commencing. Open interest has gained about 23,000 contracts in the three losing sessions since the October expiration on Sept. 28, a bearish sign indicating that fresh shorts were backing the recent push lower. Still, there's no particularly hot or cold weather and recent economic data can only be characterized as disappointing. The fact that the market can stage a rally when it is looking like it is under duress, with fundamentals overwhelmingly bearish makes us think that participants may be looking for a seasonal low. After all, it is not unusual at this time of year. This is a good place to cover shorts and move to the sidelines for confirmation, one way or the other. Look for EIA to report a build to stockpiles of 99bcf.


Natural Gas Tech Talk         
   
Natural gas loss some downside momentum. This loss, after posting another fresh low leads us to believe that another short covering rally is at hand. Therefor we will move our bias to neutral, for the moment. But with 3.699 minor resistance intact, further selling should not surprise either. A break of 3.583 will target 3.416 next and confirm that the decline is continuing. On the upside, a settlement above 3.699 minor resistance will signal that upward momentum is gathering, perhaps for something more than just a mere counter-trend rally. Recovery should be limited below 3.853 key resistance. Considering the time of year, it would not be imprudent to move to the sidelines,even though we still think an eventual fall to 3.255 is possible.

source: KilduffReport.Com