IntroView

Markets continue their respective declines on news ranging from diminished economic activity to trouble in the euro zone debt markets that reached all the way to Germany, earlier today. In the US, durable goods order were down less than expected, but they were still down 0.7%, while weekly jobless claims rose to 393k. The merely bad continues to pass for good in some quarters. The aforementioned German bond auction of ten-year notes only garnered a 65% sales rate; 35% went unsold. This will engender even greater concerns over the euro zone, which will, in-turn, press markets lower. The euro has now broken down below 1.35 versus the dollar and it is poised to challenge 1.30, before it makes a larger down move toward 1.22, in our view. Hopefully, the euro zone situation and the failed German auction will get the attention of Congress and the President. If it could happen to Germany, it could happen here too. It's enough to give one indigestion -- so, don't blame the Turkey.
 

Petroleum Markets        

Crude oil surrendered yesterday's gains, heading lower right out of the gate as Asia opened last night. The initial impetus for sellers was probably the stockpile growth enumerated in the API report. Certainly, additional pessimism emanated from the Chinese PMI which suggested manufacturing was slowing. As Europe opened, selling continued and potential bulls had to be chastened at the undersubscription of a German Bund offering, implying that contagion is spreading. Far from a salve for investor confidence, a rigorous Federal Reserve mandated stress test for the 31 largest banks must have them wondering at the central bank's concern just now, particularly with some of the exam's conditions assuming a 13% unemployment rate, 8% negative GDP growth and a 50% drop in the stock market. Participation should contract as the market prepares for a long holiday weekend, so volatility will be the order of the day.
 
N.B. Energy Overview will not publish tomorrow or Friday in observance of Thanksgiving. Happy holiday to all.


Petroleum Tech Talk   

Prices bounced off the low struck in the Asian session. Similarly, resistance was rejected keeping prices with a fairly narrow range, on lighter than usual volume. The bounce off this morning's lows though shows that the bulls have not completely surrendered. Support today is the pivot point of 96.67, and 98.11 will be first resistance which have both held. There may be the beginnings of a head and shoulders formation, if congestion is formed in the 92.-94 region, but it is too early to tell. The holiday shortened week should keep price action contained, but with an $8.00 drop from the highs, some profit taking may keep prices from falling further until next week.


Natural Gas          

Efforts to move prices up can not ignore the overwhelming bearish fundamentals. Adding to these structural woes, the low demand shoulder season looks to be extending into early December. Consequently, there will be another few weeks of injections into stocks already at record levels, long after withdrawals should have begun. Still, open interest remains saturated with shorts, even though some are probably covered with each upward move. Look for the Commitments report to show speculative shorts still at very high levels. They could be right. Longer term weather forecasts show December through February temperatures higher than historical norms resulting in a drop in demand by as much as 7%. All the market's drivers are bearish save the calendar which shows that winter is coming and while demand will be muted, it will pick up, with the ability to make the newest, weakest shorts heading for cover.


Natural Gas Tech Talk                

Follow on selling is not showing up as it should when lower marks are posted. This shows that participants are taking quick profits on short positions. The trend has, for all practical purposes met our target which should have put 3.00 under immediate threat. We will keep our bias neutral until this occurs. Conversely, short-covering has tested our prudent stop out of 3.44, but this has also failed to generate upward momentum. A bottoming zone of congestion is now tracing out. This may be a function of pre-holiday book squaring ahead of expiration next week. A settlement above 3.77 will put our bias for higher, but even if the EIA delivers a surprise it is probably out of reach for today.

source: KilduffReport.Com