MacroView

The markets are back on euro zone debt watch, yet again. Portugal is back in the mix, and there is still no resolution to the Greek restructuring or default. Germany's demands late Friday  that Greece subject its budget process to total EU control did not sit well with the subjugates. It appears you can never be more broke than prideful. The idea reminded us of the basic takeover of New York City's finances by the State back in the 1970s. There is an EU summit underway to discuss all of this, and once again, headline risk to the markets will be high. The markets will not take a failure on the Greek debt rescheduling well, as we are seeing in the sell-off in futures this morning. Personal spending by consumers in the US came in with 0% growth, highlighting the softness of the supposed active holiday shopping season. Employment data out Friday will be a big determinant for whether is a next leg up to the rally. The rally look tenuous at best.
 

Petroleum Markets

Last week's optimism over the Fed's decision to continue back door QE, the possibility of a resolution on Greece and perception that a potential embargo of Iranian oil would have little short term impact on oil prices appears to have cooled coming into the new week. Prices are holding to the lower end of the congestion zone that has described trading since before Thanksgiving. Investor's have apparently read through the Fed's announcement to detect that desperation expressed in the fact that they have no arrows left in their quiver to control events through monetary policy. While there may be an agreement as to the size of the haircut private lenders must take in Europe, there is no guarantee that provisions in default swaps may not kick in. additionally, there is also no guarantee that the provisions of those instruments will even be met. The only certainty is that policymakers will look to demand further austerity from profligate sovereigns which can not possibly be good for energy demand growth going forward, particularly from the developing world, the exports from which depend so heavily on the economic health of those very same countries struggling on the brink of Apocalypse.


Petroleum Tech Talk  
 
The upper regions of congestion were probed last week with no fresh result. This week is starting off looking at lower probes. A break of the double bottom in the lower 97's should signal a break of the recent congestion is imminent. The most important level of course, will be 90.52, the point from which the final leg higher was launched. A break to the downside might carry to lows near 75.00. Price action has carried to the upper portion of the range. Price action today, is threatening trendline support. A reversal higher though that breaks above the 103.37-103.74 resistance will carry to the next level of consolidation near 105.00 from last summer.


Natural Gas      
      
Last week's rally recovered about half of the final leg lower. Clearly, price action at week's end showed diminishing upward momentum. Accompanying production cuts which seemed to kick off short covering activity last week, were forecasts for more seasonal temperatures, and hopefully, a late season uptick in heating demand. Those hopes now look to be postponed until the middle of February, at least. Unfortunately, this translates into a growing inventory surplus leading to another record at season's end. There is just not enough time left for potential withdrawals to outperform history and catch up for the lost consumption so far this winter. Subsequent rallies then, should be very short lived, even if more production cuts are announced.


Natural Gas Tech Talk
               
Last week's rebound reclaimed about half the territory surrendered in the last leg to the temporary bottom at 2.231. Clearly, the slope of the upturn was unsustainable, even as price action remains in the upper reaches of the short covering . Attaining 3.00 will require events, such as more production cuts but subsequent surges should produce less and less intensity as they are viewed as selling opportunities. It will be very difficult to power through congestion in the 3.00-3.10 area. 2.409 again provides interim support, but once broken the way is open for another challenge to 2.231 and possibly could extend to the 2002 low of 1.96.

source: KilduffReport.Com