MacroView

The global equity markets are lower this morning (with the exception of the Nasdaq composite index which is swayed by Apple). Greece is, once again, the culprit; there is a lack of progress and open speculation that the talks could drag into the March deadline, with Greece getting a bridge loan to tide them over. As we have said, the hedge resistance to the principal reductions is fierce, and the euro zone leaders keep pressing for more relief. The earlier iterations of this situation seemed to involved banks that could be brow beaten into submission; this is a different crowd that wants their just desserts in the form of a CDS payout. The headline indices will be a tough read today, due to the blockbuster Apple earnings, which notable across-the-board, even Mac sales were way above expectations. Another interesting fact: the bulk of Apple's earnings come from products that did not even exist five years ago. Other tech earnings have been mediocre, if not lackluster. As the World Economic Forum gets under way, there will be headline risk attendant to the speeches (Germany's Merkel is first) and the sidelines, where well-intentioned media-struck technocrats usually fall prey to the baited questions thrown at them by the many journalists stalking the halls. The FOMC meeting wraps up this morning, and we will be looking for the first edging toward QE3. The UK economy contracted in Q4, highlighting Europe's continuing woes. It looks like the downward pressure is beginning to build, and the fissure looks to come courtesy of the euro zone.
 

Petroleum Markets

Crude oil prices continue to leak keep as skepticism over European resolve rises, and Iran's recent belligerence looks more and more like empty bluster, as well. API reported last night on swelling crude oil stocks, raising concern over the sustainability of demand in the US. EIA will either endorse or overrule perception later this morning when its report is issued. But the market is still hovering in the same territory it has covered for over a month. It is as difficult for downside momentum to gather with the possibility of supply disruption extant, as it is for a significant rally to build while future economic performance remains uncertain. It is as unlikely that Iran will be able to accomplish closure of the Strait, as it is that European leaders will have the epiphany required to make the substantive choices resolution requires. Eventually, one side or the others perception will develop greater clarity, and in the end we think it will be the one that reveals the chimerical nature of the optimists.


Petroleum Tech Talk     

The market is slowly rolling over and autumn's strong upward trend off the 74.95 low is looking very tired. Today's 97.80 low has just touched trendline support before bouncing off. Containment under $100.00 also suggests inherent weakness. We stay with a neutral bias however, waiting for a more convincing signal like a settlement breach of 98.00. The 13-day EMA has been broken on daily charts, and weekly and monthly charts are getting close. A further break down to 90.52 targets the 74.95 low, and a move above the 103.37-74 band still could reach 105 and 115 beyond. If the range is maintained through the end of the week, congestion should carry through to next week. A Friday break down through support could unleash a wave of long liquidation.


Natural Gas            

Gas has maintained the upper reaches of Monday's short covering rally. In fact, a new higher mark was posted yesterday. Production cuts, consequent to low prices, announced by Chesapeake Energy on Monday was the catalyst. While this is a significant turn of events in that it represents more of a structural shift in the marketplace, we hardly think it is time to call a bottom, although events may prove otherwise. Markets overshoot, to be sure, but an industry wide trend, rather than the actions of one firm would be necessary to propel a full-blown reversal. Additionally, a shift in weather patterns and the attendant rise in consumption would also be required, and we do not see any of that. There was a blast of more seasonal cold during the period EIA will report on tomorrow. Consequently, they will register a pull from stocks quite a bit larger than we have seen of late, 157 bcf. Unfortunately, this reading still in deficit to historic averages so the storage overhang continues to grow as winter heads into its penultimate month which should effectively drain momentum from the current directional impetus.


Natural Gas Tech Talk  
               
The market is still digesting Monday's sharp reversal by holding those gains. Although the weakest shorts have probably been shaken out, the bias is neutral for the moment. Remaining short positions should wait for a settlement over the 13-day EMA before covering. Such an occurrence would suggest that the counter-trend rally still has some life. Our former target of 2.409, is now support, and a reversal back down below will suggest a resumption of the major trend, now targeting the 2002 low of 1.96. If Monday's range contains price action as the week ends, the possibility that a bottom has been place must be considered. But with most price drivers still overwhelmingly, this pattern should not last long.

source: KilduffReport.Com