IntroView

There has been a full day of trading, already this morning. News that China is cutting some bank reserve requirements and a coordinated move by all the major global central banks to cut rates on dollar swaps -- effectively a massive liquidity injection -- has propelled Dow futures up nearly 300 points and crude to over 101.50 per barrel. The good news was needed, as yesterday ended with S&P lowering its credit ratings on about 10 major US banks, including Goldman Sachs. Those same banks now look to open 5% higher. The first reading on unemployment this week from ADP shows much better job creation than thought, double the estimates, with 206k new jobs. Look for aggressive upward revisions from the sell-side analysts ahead of Friday's report. The move by the central banks is being seen as a robust move. While it suggests that the global economy is struggling, it also shows resolve and a willingness to act. The bears must step aside and take heed for now. More needs to be done in the euro zone to resolve the debt crisis, but that can be dealt with, if the political will is there, to those leaders, the central bankers have done their bit, they are up next. And don't discount the ability of that will to emerge at the last minute.
 

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   

Crude oil posted its highest high since last week's 103.37 this morning at 101.64. The market possess considerable strength as momentum shows. We will still keep our bias neutral however, until the old high of 103.37 is bested, on settlement. Strength suggests that the pullback to 94.99 has concluded and a test of the highs is forthcoming. A break below will target the 90.52 breakout and change our bias to lower, with 74.99 targeted. Conversely, a move above 103.37 will suggest a 114.83 target. A neutral oscillator though, makes us skeptical of the market's inherent strength, but prices are now above EMAs on daily, weekly, and monthly charts.


Natural Gas      
    
Falling temperatures usually mean rising gas prices and this held true yesterday as gas continues its week long rise. For the moment, approaching winter is the primary focus instead of the fundamental dislocations that are ongoing. Above-normal temperatures, now over the high consumption regions, will give way to much cooler readings later this week or next week. However, even a harsh winter may not be enough to burn up all the excess supplies. The extended shoulder season has produced a rare net injection for the month. Stockpiles stood at 3.852 Tcf as of last week, just shy of the all-time high of 3.867 hit in early November. A mild winter could leave an excess of as much as 2 Tcf come April. Longs should be wary and exercise extreme caution as 4.00 approaches.


Natural Gas Tech Talk  
              
Support turned resistance at 3.77 was not threatened yesterday, keeping our bias neutral, for the moment. The rise off the recent low at 2.285 continues, targeting 3.77, the next resistance level which, if breached ,will next target 3.934. Psychological resistance at 4.00 and the then at the 200-day MA near 4.06, will probably be fairly still and we expect action to be limited to there, for now. If however, these marks are bested, momentum could extend as far as 4.10 or higher. Conversely, a break through the recent low should bring 3.00 under assault quickly. A settlement breach of 3.414 will flip our bias to lower. The market has not even come close to today's pivot at 3.599 but has tested resistance at 3.64, posting a 3.639 high earlier in the session. Prices are now also above the 13-day EMA, both of which suggest the market's inherent strength, even though down on the day right now.

source: KilduffReport.Com