IntroView

Pre-market gains held up for the most part, yesterday, in the US equity markets, and more is being piled on this morning, despite news of AMR filing for bankruptcy and Iranian protestors storming the UK Embassy in Tehran. Markets have also discounted Fitch's affirmation of the US credit rating of AAA with a change in the outlook to negative. Fitch has always been the easy "A" in the credit markets, so their sway is not necessarily that of Moody's or S&P. The skepticism over the durability of the US consumer through the balance of the Holiday shopping season abounds. It appears cyber-Monday also had good results. The main driver continues to be the euro zone debt crisis, and like Whimpy in the Popeye cartoon, the markets are giving the leadership a hamburger today for a plan to be delivered next Thursday. To be fair, one element of the plan is to have direct treaties between Germany and the individual countries to avoid euro-wide political wrangling. At least, they learned that lesson. Remember Slovakia! The true focus will center around Friday's US employment report, which is getting little attention, so far. Late, albeit conflicting, reports have hostages taken by protestors in Tehran. This situation could trump all analysis. Stay tuned.
 

Petroleum Markets    
    
The market rejected $100 again so the assumption must necessarily be made that the mark represents a resistance, if only psychological. Lacking a fundamental causality, there must also be an assumption that the restive Middle East is the chief motivating factor for the bulls, particularly as protestors have seized a second British embassy this morning, the Arab League has issued sanctions against Syria and Yemeni political dislocations avoid a resolve. Tensions in Iran may carry the potential for supply disruption. Alternatively, the possibility of the country using oil as a weapon against the economies of the industrialized West can not be ruled out with a ready market in the developing world. Additionally, geographic proximity of the Strait of Hormuz, a strategically important passageway through which 30% of all seaborne oil must navigate and relatively easy to block, at least temporarily, raises concerns, as well. Be careful of too much length as a form of insurance though as economic fundamentals remain particularly weak.


Petroleum Tech Talk   

The rejection of 100.00 makes this mark a fairly strong level of resistance. However, that may fall victim to geopolitical events just as it did last spring. The market does maintain an inherent strength, with the failure to break 97.00. The beginning of a discernible downtrend has been interrupted so we will keep our bias neutral. Critical support at 90.52 remains quite far away. A settlement above the recent high of 100.30 will show that the rally off 75.00 is still underway, and will shift our bias to higher. Be careful of length though until 100.30 is broken. If it is though 103.35 and the May high near 115.00 may not be far behind. Similarly if 95.00 is broken then 90.52 support may be targeted relatively quickly.


Natural Gas     
     
The December contract expired yesterday with a whimper dragged lower by near term forecasts of milder weather. Rumors of the death of gas prices may be greatly exaggerated. A glance at the calendar shows winter weather must be just around the corner. Still, the well cataloged fundamental imbalances persist simply put, the physical gas market is still deeply discounted because there is too much gas around and not enough weather. But that may change soon, 10-day and 15-day forecasts are now showing below-normal temperatures for most of the nation. Winter demand usually runs considerably higher than during the summer and could help tighten an oversupplied market once the mercury dips. But at least one more build, which we think will be +11 bcf, should be reported by EIA driving stocks further into record territory. Additionally, a prediction of a mild winter may put season end stockpile estimates well above 2 Tcf, which will necessarily cut into value, as well.


Natural Gas Tech Talk       
         
The market has rejected its two day elevation of highs over the 13-day EMA. Yesterday was also an outside day with a lower close, usually a technical harbinger of a move lower. Still, we would need to see a settlement below the 3.44 mark to turn our bias from neutral. Accordingly the market could trace out a congestion zone before the next directional push. Key support comes in at the 3.285 double bottom from last week, which if violated opens the way to the 2010 low of 3.212 and psychological support at 3.00. Resistance was seen at the mid-November gap at 3.553-3.557 and then at 4.00, with further selling expected at the 200-day spot moving average at 4.06.

source: KilduffReport.Com