IntroView

It was a stunning week for the markets last week. The economic data have shown improvement in the US, even as the rest of the world seems to slow, especially China. The Wall Street Journal called China out over the weekend, decrying the property bubble there, sounding the alarm bell. Their argument was compelling and reminiscent of the pre-2008 property market in the USA. It seems an awful lot of speculation has gone into real estate; we noted the photo of the mega ghost city last week. We mention this because of all the hopeful signs and mere hope over Europe setting things straight this week. While the focus will be there all week, the China situation bears watching. If that economy stumbles further, it will play out like some sudden happening. Don't fall for it. The warning signs abound. We have been willing to accept a year-end rally, if we don't necessarily believe in it. We continue to await 2012, when a more sobering reality appears to await.
 

Petroleum Markets    
    
Crude oil prices seem to be expressing a kind of modest approval of commentary coming from the Eurozone's policymakers, and also taking some solace off what was perceived as a positive US jobs number last Thursday. We, however think that a conclusion that Europe's leaders will come to a serious and decisive resolution to contain the crisis there is wishful thinking. Even if by some miracle they do, we fail to see how it will be positive for energy demand growth. Merkel and Sarkozy meet in Paris today, ahead of a European summit to commence on Friday. New Italian PM, Monte has presented a 30bn euro austerity plan, to which the market appears to be reacting positively. There also appears little worry about China's recent discouraging economic data, signaling a cooling there and a necessity to back off recent monetary tightening. Against this backdrop is a worsening situation in the Middle East with rising calls from the West for sanctions against Iran , and the situation in Syria degenerates.


Petroleum Tech Talk   

Prices are meandering into another inconclusive session so far, even though posting the highest prices since last Wednesday. . So far volume is only about 20k contracts on a 75 tic range. There appears to be an emerging rising wedge formation, suggesting a breakout to the downside is a possibility. Overhead resistance is still quite far away at 103.37, but historical average ranges imply that, measured from the low today, so far, is reachable, but unlikely. RSI may also be showing a bearish divergence, but we remind that this indicator is quite unreliable at early stages of a directional shift, although sometime when looking back has provided an early warning signal. We would hesitate to open additional length until 103.37 is breached on settlement. A short as a day trade might be worth the risk at today's pivot of 11.76 but do not stay with it if the market reverses back up over 101.00.


Natural Gas          

The rally off last month's lows continues to struggle as supply pushes against demand, despite the calendar. Friday's price action gave back ground captured the previous day as the first draw of the season was registered by EIA. But the thermometer refuses to drop even though it is December. Storage totals are just under record levels as a look at the weather out through December 13th, does not appear to produce much heating demand. Low prices have not cut into production significantly, as Baker Hughes reports that even though gas producing rigs have dropped in number to a 22-month low, at 856, is still far above where output will slow enough to effect prices. Still, given the overwhelmingly bearish picture, it speaks volumes that prices are not striking into new low territory. If the current demand environment persists past the holidays though it could be an entirely different picture as participants look towards an unwieldy storage balance come spring.


Natural Gas Tech Talk       
         
Gas prices continue to meander in a neutral zone reflecting our bias. Sideways trading may dominate until contract expiration. While this may present many short term opportunities, congestion usually breaks out violently, once participants decide on a direction. Use 3.44 and 3.77 for stop markers. Friday finished below the 13-day EMA, where it remains today, and so far, today's price action has been confined below the pivot of 3.605, and is currently just below first support at 3.567, so we can not declare that it has broken support convincingly. The prime trading for today then appears to be between the pivot and first support, but do not stay with positions too long in a market that could break either way.

source: KilduffReport.Com