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Forget 'risk-on, risk-off" it's "plan-on, plan-off." And, at the moment, it's plan-on. Two consecutive good Italian bond auctions, and talk of leveraging the ECB bond purchase facility has calmed the waters, and allowed markets to rally. China also seems ready to relent on its credit tightening regime, and there has been solid diesel fuel demand there and in the US. This may be a burst of activity in the run-up to the Holiday shopping season, which begins promptly after the last crumb of pumpkin pie is consumed, as retailers are battling to be the first to open on Turkey Day. But, just in time for the Holidays, gasoline and fuel prices are rapidly rising; it should be noted that heating oil prices are commanding a 50 cent per gallon premium to gasoline, making "free-shipping" an expensive enticement. The rally should have enough relatively positive data to feed on into year-end, but as it goes with January, the bills will come due shortly thereafter.
 

Petroleum Markets    
    
Crude oil prices continue the relentless trek upward. The drop in new unemployment claims below 400k, a slightly shrinking US trade deficit and Chinese data showing crude oil imports rising in October suggest the global economy is improving; but it is hardly confirmation it is so. New governments in Italy and Greece may help efforts towards a resolution of the European woes, but it is hardly confirmation it is so. What is so, what is painfully obvious, is that higher and higher oil prices, and continued political/economic instability in the EU makes the probability of global recession, or worse, greater and greater. We are terrified that the market will fall through another trap door like it did in May, and again, in August. The bond markets and banks are closed today, in observance of Veterans Day, which will most likely, eat into volume. Lower volume on a Friday in a generally up week may induce some profit taking selling, but the market shows no sign of staging an actual reversal. We don't get it, but there it is.


Petroleum Tech Talk   

As long as the market keeps putting up fresh highs for the move off the recent 74.95 low, already notching 98.53 so far. The road is open for the psychological resistance level of 100.00. But the momentum oscillator has hardly budged and open interest is not showing that fresh longs are entering the market. As long as the 90.52 breakout level remains unchallenged, we will keep our bias for higher. A settlement break of that level would be required to confirm an actual reversal. If that occurs, 89.17 will be the next target, leading to a re-test of 75.00 psychological support, and the, the mid-60s loom. If however, the market continues up and through 100.00, a re-test of 114.83 is not out of the question. Wait for that to open fresh length, but stay long until 90.52 gives way.


Natural Gas        
 
Despite a dip in the thermometer over the next few days, temperatures around the country will not generate a lot of heating load, at least not enough to overcome the serious supply overhang. EIA reported yesterday that injections measured 37 bcf for the latest period. Market expectations were in the 30-35 bcf area, and so, was taken as another bearish factor. The total now stands at 3.831 Tcf, more than ample to get through a normal winter, and heightening concerns were it will not be cold enough to burn up excess supplies, leaving storage at the end of the season at a record high near 1.9 Tcf. There will probably be, at least, two more weeks of generous builds and the calendar says it is almost Thanksgiving, so each successive addition will have a greater and greater weight. Unless winter gets off with a strong arctic blast like last year the market should continue to track lower towards technical markers.


Natural Gas Tech Talk  
              
The market putting up fresh lows, keeping the decline alive. As long as 3.77 is not challenged, we will keep our bias for lower. Today's low of 3.605 just touches first support. There may be some week-ending profit taking so beware of a bounce today, if opening a fresh short is contemplated. Yesterday's bar moved low enough to end the oversold threat, as new shorts must have been opened. The 3.60-3.648 roll gap left after the November contract expiration has almost been completely pierced, opening the way to the low of 3.446 hit in mid-October. A breach there will leave the path unobstructed to our ultimate target of 3.255. Above 3.77 will put the bias back to the upside for 3.978 and possibly further to 4.033 next.

source: KilduffReport.Com