IntroView

The euro zone keeps finding a way to dominate the news and market cycles. Overnight, equity markets gyrated over the prospects of the Greece referendum. Already, the Greek Prime Minister was said to resign and, subsequently, fight on. French and German leaders have placed their markers --  the referendum is on EU membership not the austerity plan already approved. Vote it down and you're gone. The ECB also surprised the market with an interest rate cut. The new president appears to have put down his marker too: Trichet who? While all this should be bullish for the dollar and bearish for commodities, it is not playing out that way. There appears to be a path to recovery, and the markets are in full embrace of this notion. Despite the somber current conditions, the markets are looking forward, and we are forced to do so as well.
 

Petroleum Markets     
   
Oil specificity briefly held sway over the macro yesterday after a bearish stockpile report. Prices seesawed following the data, initially paring their earlier gains, but later surpassing them. The report had to be viewed as bearish given the further rise in crude oil inventories and with imports maintaining decent levels, while the drop in gasoline demand points to a weakening economy. The rise in distillate demand can be explained away to a degree by seasonal factors. Still, prices ended the day on a positive note after after the Federal Reserve said it is prepared to do more for the economy if conditions warrant leaving market participants to assume that the low interest rate environment will prevail keeping pressure on the dollar, and helping to stanch the panicky reaction to Europe's debt crisis. Overnight markets in Asia did not seem so relieved and drove prices to a low of 90.87 before the stunning announcement, shortly after the European opening that Greece would not hold a referendum on the recent debt resolution reversing prices to the day's high of 93.42, so far. Clearly, the situation's fluidity allows for considerable volatility as the G-20 meeting is starting and before Friday's crucial US jobs data. At this writing, rumors are swirling about the possibility of the Greek PM resigning, stay tuned and let caution rule trading.


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 low again respected that mark only allowing sellers to put up a 90.87 low before prices reversed. Open interest has stabilized. There is a flag formation that is now describing the eight day period of congestion. While this suggests a move to the downside, we will keep our bias for higher until 90.52 is violated, on settlement. A move above 94.65 resistance will open the way for another challenge of the 100.00 psychological resistance level. On the downside a break of 90.52 will open the way to 84.10 support. If that is violated 74.95 will be targeted.


Natural Gas     
     
Gas prices continue to edge lower, keeping their negative cant as unseasonable weather puts the focus squarely the structural imbalances that have plagued the market for some time. Weather forecasts calling for normal to above normal temperatures for most of the Eastern US are expected to keep heating load low. There has also been a modest rebound in US nuclear capacity in recent days, another diminution of demand prospects. Later this morning EIA will release another stockpile measurement above historical averages, and while anticipated, will move the total closer to another record. In short, all of the normal natural gas drivers remain biased to the downside as the shoulder season drags on. Still, this is the time of year when seasonal lows are normally posted and opening fresh shorts could go wrong as quickly as the weather changes.


Natural Gas Tech Talk   
             
The clear rejection of an upside breakout and the breach of 3.77 support suggests that the counter-trend rally off the recent lows has run its course, particularly with the settlement below that mark. As we suggested yesterday once that parameter was posted length should have been closed, and we now move our bias to lower. Lack of follow on selling may bring a return of range trading, but we will now need to see a breach of 3.978 to move the bias back to higher. A move to that level after a test and holding of 3.446 support will give the market a very bullish look. Prices remain below the 13-day EMA and below first resistance at 3.801.

source: KilduffReport.Com