IntroView

Markets, having begun Sunday night lower, are now higher. This despite death of the North Korean President (more below), and the tumult that may lie ahead for the Asia region. Certainly, 2011 has turned out to be a bad year for dictators. The market is still awaiting the looming blow from S&P and its verdict on the euro zone credit ratings. A seeming deal to cut payroll taxes and keep the US government funded appears to have crashed and burned with the House in revolt over the Senate's two-month payroll tax cut solution, down from the year-long plan that made it out of the House with little enthusiasm. The Holiday shopping numbers have become mixed and even reportedly plummeted in the days since Black Friday. Many stores are remaining open around-the-clock through Friday in a last-ditch attempt to attract consumers. The final numbers will likely set the tone for 2012 -- will the signs of improvement in the US economy be built upon or fizzle under the reality of a stressed consumer? It looks like equity market buying will prevail into these last two weeks of the year. There isn't enough time for Europe to blow it again, but S&P could step in as the Grinch Who Stole Christmas and the storied Santa Claus rally.
 

Petroleum Markets        

Pessimistic sentiment was on the rise as the week closed with France being put on a negative credit watch and ECB chief Draghi again expressing his opposition to further expending the central bank's balance sheet with more bond purchases. The Asian session extended the downward momentum for crude oil prices as the death of North Korea's "Dear Leader" Kim Jong Il, launched fresh uncertainty in the geopolitical sphere. Investors' concern will focus on China's reaction. The globe's second largest oil consumer is almost as concerned with turbulence on its periphery as it is in placating its domestic population. We assume then, that they will attempt to insure, as best they can, a smooth transition to his anointed successor, his son, Kim Jong Un, at least for now. A military coup would have severe repercussions in the region, and this China does not want. Particularly as their economy is faltering. The situation will bear close monitoring, but China's desire for east Asian stability will probably lead to using the full weight of their influence in keeping their ally in check. Otherwise, focus will remain on what seems to be darkening gloom over Europe's economic prospects. Agreement appears to be growing that Europe is headed into recession, or worse, with the attendant consequences for aggregate demand.


Petroleum Tech Talk   

The move off the recent high of 103.37 continues despite a reversal higher in the early going in Europe. Former support, now resistance at 94.99 remains intact, so we will keep our bias for lower. Price action is heading into a zone of congestion from late November in the 90.00-94.00 area, and considering the time of year, some profit-taking should hardly surprise. Additionally, the slope of the decline increased last Wednesday to a degree that is unsustainable. A reversal higher of the momentum oscillator may be an early indicator, as well. Prices could pierce overhead resistance to test 100.00 though without substantially changing the look of the chart. A break above the most recent high of 101.45 from last Tuesday would change our bias to neutral for a possible test of 103.37.The important level to watch is 90.52. This is the point from which the last leg higher to 103.37 broke and could present fairly stiff support, coming down.


Natural Gas          

Even though the thermometer dipped to more seasonal levels over the weekend, forecasts hold scant hope of increased heating demand. Now that a third of what is normally the highest demand season of the year has passed without much of a pull from stocks to meet heating requirements, the overhang can be characterized as nothing less than onerous. The continual backdrop of overproduction and, at best, only tepid economic prospects hold little potential support for gas prices unless Mother Nature blows in 2012 with a sustained Arctic blast. At present, forecasts do not present much hope. Whatever calculus employed, lower prices seem inevitable until evidence of curtailed production appears. Baker Hughes data on Friday showed that the number of gas-directed rigs fell for the seventh straight week, the type most often used to extract gas from shale, climbed to another record high, and therein lies the crux of the problem from overproduction. But as quickly as weather can change so can sentiment in financial markets, particularly at historic highs or lows. We also become wary when unanimity amongst participants is as high as it is now.


Natural Gas Tech Talk                

Gas put up another life of contract low at 3.084 on Friday, so our bias remains for lower, targeting the 2.996-3.00 zone. We use anticipate that with the approach of the important psychological level of 3.00 approaching, so close to year-end position squaring, support could potentially prove quite stiff. But if trading moves easily through this zone it will indicate that downward momentum remains very strong. On the upside, use the former target of 3.255 as a potential early indicator of a bottoming and a place to cover the most recent shorts. A settlement break of 3.299 will change our bias to neutral, and may have enough momentum to carry through 3.44, which would confirm a reversal and change our bias to higher. The new low on Friday takes away somewhat from the oversold condition, but making fresh lows could become increasingly difficult as 3.00 approaches.

source: KilduffReport.Com