IntroView

The euro zone contagion fears spread to Europe's old guard with interest rates rising for debt from Austria, Finland, and Netherlands -- long thought to be insulated from such runs. The euro is pressing lower this morning, as the contagion and lack of economic growth in grips the calculus. The equity markets have reacted negatively, and the strengthening dollar is pressuring most commodities with the notable exception of energy. For the most part, the tepid economic dat are not forecasting much in the way of economic growth, but energy prices, especially the distillate or diesel category of fuels are signaling strong growth and demand. This spike in prices will further erode consumer sentiment into the holiday season, and will likely make the prospects for 2012 all the more dim.
 
 
Petroleum Markets        

Crude prices posted a 99.43 settlement yesterday, another multi-week high, continuing its relentless march higher. A positive US retail sales, the Fed's "Empire State"manufacturing measure and data showing growth in Germany and France, the EU's strongest economies apparently trumped worries about the spreading debt contagion. Expectations for another draw down of stocks, when EIA reports, later this morning, were also supportive. After the close though API reported a surprise build to crude oil stocks, and consequently prices have drifted a bit lower in overnight trading. While oil's month-long strength is undeniable, we have to wonder how much more the current rally has left to run. Economic policies consequent to Europe's debt crisis, and calls for both budget cuts and tax hikes in the US must necessarily be detrimental to incremental GDP growth, and as a result, energy demand. Higher and higher crude oil prices will only make this condition more acute. So we remain very skeptical.


Petroleum Tech Talk   

Crude oil posted another higher high, higher low and higher settlement as the rally continues. But with a relative strength measurement closing in on 70 on a 14 day moving average basis the market is showing an overbought condition is building and a correction is imminent, so we will keep our bias for neutral, despite yesterday's advance. However, a breach of 100.00 will invalidate the correctional scenario, and put the bias back to the upside. Taking profit is the prudent thing to do here, but a short position should be closely stopped above 100.00. With prices so far ahead of the 13-day MA, there is plenty of room for a corrective decline and we would need to see a break below 90.52, resistance, now support broken. We remind again the the 61.8% retracement of the 114.83 high down to the recent low at 74.95 is 99.60. There have been probes above, but the lack of follow on buying shows momentum is waning. Low volume, narrow ranges and the lack of a sharp turn higher in the momentum oscillator, also shows the bulls are beginning to lose their dominance.


Natural Gas         
 
Potential buyers, waiting for a seasonal reversal, may have to wait a little longer. The fundamentals are just too overwhelming.. Technical measurements are decidedly bearish, as well. When both point in the same direction, the most powerful directional moves usually ensue. This year, the so-called "shoulder season" is endless. There was an early winter storm in the Northeast, but that was followed by several weeks of unusually mild weather, that persists. Daytime highs will only reach into the low 50s today and tomorrow in New York, but the mercury climbs again, at the weekend. As a consequence, at least two more weeks of injections to storage. This week, another 28 bcf injection should be reported by EIA into stocks already at 3.831 Tcf. An extraordinarily cold winter will be necessary to eat significantly into that. The road is open to still lower prices.


Natural Gas Tech Talk   
             
The market broken through the 3.446 target. In fact, yesterday's low was 3.39, leaving an open road to our target of 3.255. Most of the price action, so far today, is below the pivot of 3.426, posting a high of only 3.43 as of this writing. Resistance will come at Monday's 3.553-3.557 gap, and then at support, turned resistance at 3.77, which is where we would place stops for current positions. We will keep our bias for lower. An upside breach of 3.978 will change that view to an upside bias. The lack of follow on momentum is indicative, of not only the calendar, but also relative strength below 30 shows an oversold condition is building. A short-covering spike is in the wings, so be wary of opening fresh shorts, or adding to positions.

source: KilduffReport.Com