IntroView

As the Greece narrative winds down, the Italy narrative heats up. A new government is coming the way of the Greek people, and, now, the Italians await the fate of Il Gropee. Closer to home, the tepid unemployment data passed for good and was supportive to the markets. Historically, however, the data were poor. The IMF is looking to reduce, further, the outlook for global GDP, and the French appear to embarking on an austerity plan of their own. With most of the major European economies pulling down their government spending, the hit to global GDP has to increase. ANd, with Europe being China's major customer, the reverberations are obvious. The bond markets are pushing Italy's borrowing costs to the brink with the interest spread to the German benchmark setting new records on a daily basis. Still, energy prices have maintained their October gains and gold nearing an assault of $1800 per ounce. The theme of buying stuff over instruments of full faith and credit is similarly maintained. Another volatile week lies ahead. The analysis argues for lower, but the markets may not agree.
 

Petroleum Markets        

The market is continuing with macro-influenced volatility again today, as events in Europe continue to shift. Crude oil prices finished on Friday with another high settlement since low, earlier last month. Apparently no one cared to go into the weekend with hopeful statements coming from the G-20. Early Asian action took prices to another new high for the move, but as Europe opened, it skepticism returned taking prices to the low of the session, so far. Just a short time ago, rumors began to circulate that Italian Premier, Silvio Berlusconi, was preparing to resign. This news lifted the market to just below the day's highs and has been stuck at 94.50 or so, awaiting confirmation. The jockeying back and forth has apparently gotten too much for some, as speculative interest pared net length, measured through last Tuesday, according to the weekly Commitments report. For the moment, signs point higher, but momentum is sputtering. Stay with length, but be wary of building on those positions.


Petroleum Tech Talk   

Crude oil put up the highest settlement since the 74.95 low. We will keep our bias for higher, but several divergences trouble us. The fail in open interest shows positions are being closed. The life blood of any directional move is new positions being opened. The momentum oscillator has turned down, as well and this may be an early sign of a reversal. Key support is rather far away at 90.52, the breakout point of this last leg up. A break below 89.17 is required though to flip the bias back to lower for another test of 74.95.The run above the daily 13-day EMA continues and prices have been down through and back up through today's pivot point of 94.02, both bullish. Still we urge caution on opening fresh length at this level.


Natural Gas          

As should be expected at this time of year, gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts for late October and early November on heating demand. Temperatures in the Northeast and Midwest are expected to average above-normal from November 7 to November 11, with daytime highs ranging from the mid-50s to low-60s, so not surprisingly, prices are under a bit of pressure this morning. Last Thursday, EIA said storage rose by 78 bcf to top off at a total of 3.794 Tcf, offering a much larger cushion than inmost years. This very uncomplicated calculus should lead to lower price levels, especially with technical indices pointing in the same direction. The problem, as it has been for some time, is that everyone in the market comes to the same conclusion, so it is becoming increasingly difficult to post a lower low. For the moment though we think that is where the market is heading.


Natural Gas Tech Talk                

Prices have moved .04 cents below resistance at 3.77, so shorts are safe with that as a stop-out. Obviously this keeps our bias negative. The move below 3.73 this morning should accelerate downside momentum, a settlement below, even more so, with an eventual target of the previous low at 3.446. If however, the market reverses again, to move above 3.978, this view will be negated. A settlement above that mark should be able to carry over the psychological resistance at 4.00 with an eventual target of the mid-October highs, just above 4.00; which if taken out should be able to catty to the early September highs.

source: KilduffReport.Com