IntroView

With the drama of MF Global fading into the background, the Greek Prime Minister has tried to reignite the drama around the euro zone debt crisis. In a potentially crazy-like-a-fox moment, the PM has put forward the idea of nationwide referendum on the previously agreed to austerity measures. The vote will be linked to remaining in the euro zone. Apparently, a majority of Greeks oppose the austerity, but favor the euro currency. It continues to amaze that the politics of one small country can so greatly roil the markets. The week overall lights up now, with the G20 meeting, the Fed decision, and the employment report on Friday. The Fed meeting will be closely watched for a hint at QE3; the implications for another round are a spike in commodity prices, as the flood of dollars pushes up this dollar-denominated asset class. The equity market has given back much of its gains on the uncertainty. Look for that to continue. (Editor's note: The rare October snowstorm hit us hard; we apologize for the missed publications. We're glad to be back.)
 

Petroleum Markets     
   
Macro influences buffeted crude oil yesterday as equities and currencies went on a wild ride, responding to events surrounding Europe's ongoing debt crisis. The crux is Greece, in calling for a referendum and a confidence vote in parliament. Italy is also making moves that, in effect, are balking at the current debt resolution agreement. Naturally, investors are spooked. So for oil, the sentiment pendulum is swinging back and forth between perceptions that hold that a resolution will create an environment conducive for economic growth and those who contend that the EU is falling apart and will produce chaos. For oil prices, despite correlations between other markets, the deciding factor will be is how this all plays out for demand. A world in chaos may put a premium on spot prices, as currencies devalue, and purchases are influenced by immediacy, a phenomenon currently expressed in the flattening curve. In the final analysis, growing public sector debt and attendant unemployment can only threaten a deflationary spiral. But the persistent strength in oil must be respected, just be wary of the rug getting yanked out from under the current market structure.


Petroleum Tech Talk   

Crude oil continues to cover the same ground, but has respected the breakout price of 90.52 that marked the high before the recent low at 75.00. Yesterday's break below 90.00 and the subsequent $2.00 recovery shows a lot of inherent strength. However, we continue to scratch our heads over the falling open interest which suggests that bulls are beginning to lose control. So far, first resistance at 93.66 has been respected and if this is eventually the high of the day the bear flag formation will be waving in favor of an eventual sell off, but as long as the market holds above 90.52 we will have to keep the bias for higher.


Natural Gas          

A falling mercury led gas bulls to have second thoughts as prices approached $4.00. with the passing of last week's cold wave and accompanying winter conditions, demand has diminished. Eyes now turn to tomorrow's EIA stockpile report, where expectations hold that injections surpassing last year and the five-year average will be reported. We think it will show 72 bcf was added to brimming stocks which are moving closer to setting another new record high level. Price action yesterday rejected the psychological barrier of $4.00 and probed below support at 3.77, but still managed a settlement above. Prudence now demands length now be closed. Short term trading is probably safe above 3.77 and below 4.00, with close stops limiting risk. Structural positioning though should wait for a convincing break of either of those parameters.


Natural Gas Tech Talk   
             
The clear rejection of an upside breakout and a re-test of 3.77 support suggests that the counter-trend rally off recent lows has now concluded. Ergo, we flip our bias back to neutral and recommend closing length and moving to the sidelines. A break, on settlement, of 3.77 should end range trading and start a new move below 3.446, the recent low, and targeting 3.255. A break above 4.00 will be required to put the bias back to higher, signaling a test of 4.033, the 38.2% retracement of the 4.398 to 3.446 move. Currently, prices have moved below the 13-day EMA and today's pivot of 3.832, giving price action, so far, a bearish look.

source: KilduffReport.Com