IntroView

The euro zone deal came together, and the markets soared on the news. Apparently, European banks blinked in accepting a 50% reduction in principal on Greek debt, and that was key. The banks are claiming victory because they limited their losses to Greece only. The other good news was US Q3 GDP, which posted a surprising 2.5% reading. Whatever your feelings, just on the math, a double-dip recession is off the able. This seems to validate the argument of many that the economy has turned up even though we remain troubled by high unemployment. Fed officials have also hinted at a QE3 regime, which also benefits asset values. Analysts were punching plenty of holes in the euro zone debt deal, but the markets' verdict was surely positive. This is a cycle that could feed on itself for some time, perpetuating the rally.
 

Petroleum Markets    
    
Crude got caught up in the enthusiasm over a potential resolution to Europe's maladies that pushed most markets around the globe higher yesterday. Supportive US GDP data also helped improve perceptions about energy demand growth in the US. This view may have been bolstered by a slightly improving jobs market with "only" another 402k filing for unemployment compensation. The day's oil rally also benefited from expectations that China may loosen a tight liquidity policy in Q4 as growth slows. In overnight action though, oil has lost ground as there appears to be some difficult conundrums surfacing to bring the Euro-deal to fruition. The market has shed almost $2.00 off yesterday's settlement. But crude oil still looks set to post a fairly good rise for the week. Even at today's lows, prices are almost are almost $5.00 higher than last Friday's finish. There is a possibility that more of that could be lost as positions are pared before the weekend, particularly with momentum being driven by the next headline. Over the next few days there could be more of them, which could prove costly.


Petroleum Tech Talk   

We will keep our bias for higher, even though there are some disturbing characteristics to this rally; specifically declining open interest in a rising market accompanied by unusually high volume. The lifeblood of any directional push is more participants joining the dominant crowd. While volume seems to affirm that, open interest says positions are being closed. For the moment there is a temporary top at Wednesday's high for the move at 94.65, that will have to be bested to generate more upward momentum. As long as support at 84.10 remains intact the rally has the ability to cover more ground. The break above 90.52 resistance on Tuesday opened the way to 100.62, next key resistance, but that seems out of reach, for the moment. Since the break though, the market has covered 90.00-94.00 repeatedly over the last four days. The momentum oscillator still points higher on daily charts but this high volatility over the same ground on high volume shows that there is a lot of uncertainty, and with the recent direction up, it could be the bulls who eventually capitulate. Or, it may just be a pause before another leg higher.


Natural Gas          

Gas prices were pressured lower yesterday after an unexpectedly large injection to stocks was reported by EIA. Participants were also disappointed by a loss of intensity in Hurricane Rina, which has altered its course away from Gulf of Mexico operations. But for the moment bulls are favored by some fundamentals turning in their direction; like near term forecasts for colder temperatures and a stronger cash market. Last year, demand increased 74% from October to January, and while those conditions may not be duplicated, it points out the seasonal demand shift anticipated by the momentary halt to gas' fall from recent highs. Keep in mind though that we are not advocating a runaway market. The counter-trend rally should be contained by the mid-October high, just above 4.00, and certainly by successive highs in the 4.30-4.50 area, notched in early September. With overproduction continuing apace, prices should remain on the defensive well into next year.


Natural Gas Tech Talk       
         
Bulls must have been white-knuckling yesterday after the stockpile report, but the December contract is back on the upswing today which should continue past the overhead resistance at 3.853.Once that is breached, is should be fairly easy to make the run to 4.00. In the final analysis though, in the absence of some extraordinary exogenous event, buyers should be restrained within 4.143. We will keep our bias for higher, as long as support at 3.714 remains intact. The bull pennant continues to form and prices are above today's pivot at 3.774, and should move up over the 13-day EMA today or Monday.

source: KilduffReport.Com