IntroView

Positive sentiment dominates this morning, once again on hopes of a resolution of the euro zone debt crisis. Ahead this weekend's G20 meeting in France, there is word of increasing capital inthe IMF and World Bank to be used to recapitalize European banks and countries. Emerging market countries are said to be in the mix, and in an interview on CNBC, Treasury Secretary Geithner opened the door for IMF intervention. While retails sales are also being hailed, the despair of the very shoppers was evident in the University of Michigan Consumer Sentiment reading. And the survey's measure of expectations is at the lowest since May 1980. If you are old enough to remember those dark days, the reading is overly cautionary. Yet, the recent rally continues on. The S&P is breaking out above some key technical levels, A strong close to the week will argue for more gains next week.
 

Petroleum Markets   
     
Yesterday saw the pull of continuing uncertainty over Europe's maladies and improving US economic data. A pall was cast over the markets by news, early on, that German banks may have to withstand substantially larger losses on their Greek bond holdings than originally thought. This brought the enactment of the current agreement into question. China's trade surplus narrowed for the second consecutive month, as well. In the US, initial jobless claims fell to 400K in the week ended October 8, taking the 4-week moving average to 408K. Why this is encouraging we do not know. US retail sales this morning also provide a bright spot, pointing to a consumer that has more life than originally thought. Crude oil climbed to over 86.00 on that news. But we have been covering the same ground all week, a week that has been characterized by daily ranges much tighter than we have seen lately. This suggests that the market has found a rough equilibrium, with both buyers and sellers are not particularly uncomfortable with the current level, while the world holds its breath waiting for a resolution to European, American and Chinese dilemmas.


Petroleum Tech Talk    

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.


Natural Gas       
 
While gas did manage to post a fresh low at 3.446 right after the unexpectedly large injection of 112 bcf, the inability to extend troubles us. This may be a bit more than short-covering. While price action is inconclusive, we have seen this before; the market's ability to rally in the face of overwhelmingly bearish fundamentals. Participants are now eying the calendar and weather forecasts that show the thermometer dropping in coming weeks. A shot of cold air will drive into the center of the country next week and could reach the mid-Atlantic region by next weekend which would boost heating demand. While prices could still drift lower, it should not surprise that with prices this low at this time of year, buying is only prudent. Additionally, About 20,100 megawatts, or 20%, of the country's nuclear power plant capacity was offline for seasonal maintenance.


Natural Gas Tech Talk
               
We are still unconvinced that seasonal lows are in place. We would need a settlement above 3.64 to convince us of that. But the inability to extend lower yesterday makes us think that it is a distinct possibility. Today's price action is inconclusive, so far, above today's pivot but still well below the 13 day EMA. 3.64 resistance is a bit stronger having been tested once already. If broken there should be further, and stiffer resistance at 3.853. On the downside a break of our target at 3.416 opens the way to 3.255.

source: KilduffReport.Com