IntroView

Markets are on the march higher, again, this morning.  The hopefulness around the euro zone debt situation and the positive embrace of recent economic data are at the core. Gold and oil were the notable risers, yesterday. With oil notably shaking a negative stock market and stronger dollar. The safe-haven/inflation trade correlation looks to be returning. Obviously, with financial stabilization coming from central governments, the search by investors for stores of value is back on. Copper has been slow to react, but it has gained back much of its recent losses. The fundamental picture there had a wrench thrown in it by the revelation of much bigger Chinese stock piles. So, it will take a while for the froth to return. But, overall, the rally is continuing along a perceived road to recovery.
 

Petroleum Markets    
    
Crude oil is on the rise again, now for the fifth consecutive session. Apparently, buyers are taking solace from hopes new leadership in Greece and Italy would be able to deal with the debt crisis. Additionally, IAEA is supposed to issue a report showing Iran is developing nuclear weapons, intensifying geopolitical tensions and raising fears that UN sanctions would threaten global supply. Iran notwithstanding, the crux of the matter is going to be executing whatever plan emerges in Europe. For Greece, a new coalition government has to show its commitment to the EU/IMF program to receive the sixth tranche this month and for Italy there must be an effort to speed up the process of implementing the announced austerity measures. This is not going to happen without severe social dislocation. We are doubtful there will be a good outcome. In the US, the "super committee" is heading towards a deadline set last summer to find more budget cuts, we do not think this will produce a good outcome either. Nor do we plan on standing in front of the freight train that is the current oil rally as perceptions grow that supplies are tightening.


Petroleum Tech Talk   

Crude oil extended to over 96.00 yesterday and put up a fresh high this morning at 96.60. As long as this keeps up and support at 90.52 remains unchallenged, we will keep our bias for higher. Open interest still shows a net loss though migration to the January contract has begun in earnest. The momentum oscillator is flat despite prices moving higher. So we still we urge caution on opening fresh length at this level. First support is at 94.95 which has not been challenged, so far, and today's price action has stopped just short of first resistance at 96.68. While most signals appear to be on go for a run to 100.00, there are troubling divergences and so we remain very wary. The rug could be yanked out from under the market at any moment.


Natural Gas          

Gas prices kept falling yesterday with mild weather adding to the impediments of ample supply and constrained demand. The December contract put up the lowest price since October 24th at 3.659. Since the beginning of November, futures prices have fallen nearly 5.5%, as mild weather across the higher consumption regions limited heating demand. A lengthier "shoulder" season has allowed for the accumulation of stockpiles to their present level of 3.794 Tcf. With most forecasters expecting mild weather to continue over the next week or so, storage growth is on track towards last year's record level, discouraging buyers. But at this time of year, this can change quickly, and with an open interest still heavily biased with speculative length, violent reversals are possible. But until real heating load, or an arctic blast appears, the trend lower should continue.


Natural Gas Tech Talk     
           
Prices moved lower yesterday, posting fresh lows for the December contract for this leg of the move. Price action never really challenged resistance at 3.77, posting a high for the day at 3.765, so short positions are safe with that marker as a stop out. Our bias remain lower, and the market is on track for a challenge of the 3.446 marker. 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 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 carry to the early September highs. So far today prices are below the pivot of 3.704 and the gap to the 13-day EMA is widening both bearish. While the market may becoming a bit oversold, it is not grossly so. Be careful about opening fresh shorts or adding to existing positions; sharp reversals could occur at any time.

source: KilduffReport.Com