MacroView

The MacroView focus this morning is Greece, yet again. There are reports of a deal to restructure the debt that would result in principal reductions of up to 68%. This is far from settled, however, as the acquiescence of hedge fund bond holders is required. We don't see their support materializing. The glow of the drop in weekly jobless claims was short-lived, and the market got its first disappointing coincident economic reading, in a while, from the Philly Fed. The S&P 500 Index remains above 1300, and it will be an impressive move, if that level can hold on a weekly closing basis. Earnings have been decent, so far, with exception of Google, which got pummeled in after-hours trading last night, dropping 10% at one point. It is important note that the markets are increasingly discounting the euro zone crisis. The Greek situation is viewed as contained. The efforts of the ECB, the looming IMF measures, and increasing expectations of another round quantitative easing from the US Fed are calming markets by ensuring liquidity. Euro zone banks rallied enjoyed a strong rally, yesterday, and the US volatility index broke under 20. It seems like too easy and quick of a fix. But, as we keep saying, it is too early to sell.


Petroleum Markets

Crude oil prices have surrendered most of the week's gains as a counter trend move in the euro appears to have concluded to the dollar's benefit. The US greenback was also helped by declining initial jobless claims. Failure of European diplomats to reach an agreement on the details of a possible embargo of Iranian oil has also must allowed for some long liquidation at the end of a week of stronger prices. With only new home sales on today's economic calendar, we do not expect the day's price range to expand much more. The balancing between Europe's prospects and the dispute over Iran's nuclear ambitions remains the dominant directional determinant as the week concludes. We hold that Iran will continue its blustering brinkmanship, especially if Europe continues to waver on sanctions. Indecisive economic policymakers there will also fail to resolve the debt conundrum. The result will keep prices, at least temporarily bound to the familiar range. Described by 98.00-102.00. Today is also expiration for the February contract so accommodative spread trading reflective of position migration may keep action restrained, as well. We hate to equivocate but until one or the other of these influences diminishes, the market will continue with its precarious equilibrium.


Petroleum Tech Talk     

Price action yesterday retreated again just over 102.00. 100.00 has been tested, but we do not expect a substantive break lower. 92.74 marks the 38.2% retrace of the 74.95 to 103.74 move and we will need to see that meaningfully broken to conclude that the rally off 74.95 has concluded. A settlement breach of 98.00 will be a harbinger of deeper declines and target 92.74. A break below 90.52, the point from which the last leg higher broke, potentially targets 74.95. But a significant move above 103.34-73/75 resistance could generate sufficient momentum to reach congestion at 105.00-106.00, and could potentially extend to last Spring's highs near 115.00.


Natural Gas         
   
The fall in prices is accelerating, and posting fresh lows. Yesterday's EIA report, showing a pull from stocks much lower than expected, added to the downward momentum. The NOAA forecast for the next several weeks suggests that subsequent inventory calculations will continue to show widening to averages. Seasonal ability to draw substantively on stocks is rapidly diminishing. End of season estimates are looking more and more onerous. Consequently, there is a very strong possibility that sellers could challenge $2.00. $2.50 though, has been suggested as a price below which production may begin to be shut in. Gas has essentially been in a steady fall since the peak in mid-2008, near $11.00. We again warn that rising momentum after a long trend frequently signals a period of consolidation or a reactive counter trend could occur at any time. The slightest change in the weather, or even the week's conclusion, just might be the catalyst that sets it off. Be extremely wary of opening fresh shorts at these prices.


Natural Gas Tech Talk    
             
Passing easily through our target, puts the market in uncharted territory. The only significant supportive marker is the early 2002 low of 1.905. Obviously then, we will keep our bias for lower. But the market is grossly oversold, and short-covering, may begin in earnest at any moment. The current slope on the chart is unsustainable. Stops on short positions should be moved defensively to an area just over our former target of 2.409. If that mark is breached on settlement, the trend's conclusion will be signaled. With open interest overwhelmingly short, considerable upside momentum could be temporarily generated, as well.

source: KilduffReport.Com