IntroView
 
Global markets continue to cling to the illusory plans by central bankers to save Greece and recapitalize euro zone banks. Interestingly, too, we hve observed commentary from various Wall Street analysts that: 1. the economy is not as bad as people think; and 2. the recent data have not been too bad. As a result, we are in the process of getting our data feeds checked out. The numbers have shown only the slightest of improvement. A good example of this is this morning's weekly jobless claims, which came in at at just over 400,000 new claims. That passes for an uptick when you start with recent numbers upwards of 430k per week. We still maintain that tomorrow's monthly employment data will come in near-zero or worse. The ECB stuck it to the markets too, earlier, leaving interest rates unchanged. They are on the front lines of the inflation fight, by a lot. The markets have given all the credit they can to possible plans to save the euro zone banks -- reality awaits.
 

Petroleum Markets      
 
Yesterday's surprise draw down of crude oil stocks certainly diverted focus from ongoing macroeconomic maladies. EIA reported a particularly large draw, in place of the build that was expected. The bargain hunting that commenced on Wednesday, when the market closed in on $75.00 seems justified by encouraging news showing the US service sector had expanded in September and ADP's unexpectedly positive jobs report. However, worries about the euro zone's economy persist and the US debt crisis is hardly resolved. Both these issues speak directly to demand, even if supplies are tightening a bit. As we expected, as prices fell below $70.00, OPEC would start jawboning, and they did not disappoint. An Iranian oil official told a local newspaper OPEC could hold an emergency meeting even though none was scheduled and Iraq's Deputy Prime Minister for energy stated that a drop in global oil prices below $90 would be "difficult to accept". While prices have now climbed $5.00 since Tuesday, they will need to rise quite a bit more to characterize the current move as a full blown reversal.


Petroleum Tech Talk    

Crude oil continues its upward path off the recent low of 74.95. Today's action has reached to just over 81.00 and is set to define the upper limits of some coming consolidation, which is why we will stay neutral for the moment. If some exogenous surprise brings added momentum, the current counter-trend rally could turn into an actual reversal. As long as current buying is confined under last week's high of 84.77 the move down from $115.00 should continue to our target of 64.00 or so. On the upside, a break of 90.52 resistance is needed for a reversal confirmation.  


Natural Gas       

Gas keeps posting fresh lows, falling to 3.531 this morning. Another blow to prospective bull will come later today, when EIA is expected announce a 99 bcf build to stocks, adding to already ample supply. There is still only a suggestion of autumn as moderate temperatures continue to dominate over the high consumption regions, extending the low demand shoulder season. Deficits to historic averages are closing. Last week, total gas stocks climbed to 5 bcf above the five-year average, the first time since mid-April. Gas prices slid nearly 10% in September and lost more than 16 Q3, the biggest quarterly decline since the first quarter of 2010. The posting of another low today, makes both the technical and fundamental picture exceedingly negative. Beware of sudden counter-trend reversals, particularly if the EIA report surprises.


Natural Gas Tech Talk            

We will keep our bias neutral, for the moment, even though the market has posted another low at 3.531, this morning. 3.699 resistance is intact, price action today is confined below the pivot at 3.605 and there is a widening gap to the 13-day EMA, all still negative and more selling should occur. Now that 3.583 has been broken the next target will be 3.416 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, but wait until 3.416 is breached to establish fresh shorts.

source: KilduffReport.Com