IntroView

Markets are up uniformly on the latest euro zone debt crisis resolution - a stalwart plan whose details will be worked out by November 3rd. Once again, a great many issues remain, and it is difficult to envision that they will get it done by the deadline. Regardless, for now, the plan to craft a plan is lifting the markets. As a reminder of the reality on the ground, Moody's, late Friday, lowered a number euro zone credit ratings. Today, we will see reduced volumes due to Columbus Day observances. Look for a turnaround Tuesday.

 
Petroleum Markets      

Last Monday it was all doom and gloom as participants assumed Europe was headed to Armageddon. All it took apparently, was for "Mer-kozy" to acknowledge that their banks needed to be recapitalized for market participants to assume all would be well. We fail to see how this conclusion is reached when another 400k plus people filed for unemployment compensation in the US last week, the economy only produced 103k jobs last month and the US unemployment rate stays stubbornly above 9%. It should not surprise then that speculative interest, shed more length through last Tuesday, when the recent low of 74.95 was registered. Since then, hopeful talk has trumped data as prices rose over $6.00 through this morning. We are skeptical of this rise as long as there is only a hinted at "plan" without details from European political leadership. Similarly, in the US, intransigence from both sides of the debate can hardly inspire a sustainable confidence to keep feeding financial markets' upward momentum.


Petroleum Tech Talk    
 
Crude oil continues its upward path off the recent low of 74.95. Price action, so far today has posted a new high of 84.72. But the rise has been choppy and therefor inconclusive. Open interest has dropped since the recent low was posted, showing that more positions are being closed. We still think that a move to our target in the mid-60s is probable, but the current counter-trend movement could extend to the recent highs of 90.52 before we are convinced that the sell off from the May highs is concluded. The market has moved beyond the 13-day EMA and has breached first resistance at 84.20 already, but the inability to extend further makes momentum look weak. We will keep our bias neutral for the moment.


Natural Gas       

So far today, gas has made another new low for the current move. Profit gathering, counter trend action has been minimal since slipping under $4.00. The heat from early summer, that ate away at surplus stockpile balances, has not been matched by autumnal demand, but it is coming. The long departure of summer over the high consumption regions has extended the injection season. As of last Thursday 3.409 Tcf was on hand. Participants have been impressed with the big storage numbers as levels approach last year's record levels. The short term weather outlook adds to the bearish picture, so it is going to be quite difficult for prices to press much higher until the appearance of heating demand. But every directional move has within it the seeds of its own demise and despite overproduction, once seasonal loads materialize, prices could reverse quickly.


Natural Gas Tech Talk            

We will keep our bias neutral, for the moment, even though the market posted another low at 3.452 in action so far today. We are very close to our first target of 3.416, thus our neutral stance. We recommend taking profits now and wait until a counter trend rally appears, or there is a settlement below 3.416 before opening fresh short positions. 3.699 resistance remains intact and the gap to the 13-day EMA continues to widen. 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. We still think an eventual fall to 3.255 is possible, but wait until 3.416 is breached.

source: KilduffReport.Com