MacroView

The January employment report was a stunning. 243k jobs were created, and the unemployment rate fell to 8.3%. The report was uniformly solid and broad based, with the major categories all showing gains. Factory hours worked rose to their highest since 1998. Recall that we referenced a Bloomberg radio report that noted the rise in third-shift operations at the Midwest auto plants. There it is. Equity futures have spiked higher on the report, as have oil prices. Gold is lower on the report, so the verdict is clear that this is another step out of the deep economic woods. The report also appears to validates the recent rally in equities that dates back to mid-December. Market sentiment and our own views will have to adjust and take the impact of this report into account; this likely delays the Federal Reserve's next round of QE, and GDP forecasts will probably get a bump higher, possibly as high as 4.0% - if this job creation rate maintains itself, it would be justified. Not to say all the problems have been fixed; we have been troubled by signs of a slowdown from the recent coincident indicators. The circular firing squad that is the Greek debt negotiations continues, but is apparently very close to resolution: "days, if not weeks away," said one of the chief negotiators, earlier today.  That is what passes for clarity in this case. More succinct, however, was Germany's finance Minister who said, "we can't pay into a bottomless pit." Speculation that Greece hits the euro road is increasing, once again. The markets won't like that, even if it is obvious. Finally, Secy. of Defense Pannetta told the Washing Post that an Israeli attack on Iran is not far off, possibly within months.

 
Petroleum Markets

Growing stockpiles and numbers of initial filers for unemployment benefits every week is not producing a lot of confidence for offsetting demand. The non-farm payrolls report, later this morning, will have to be considerably beyond expectations to reverse the market's growing downward momentum. In fact, if it were not for lingering tension over Iran tension, prices might be even lower. $95.00 crude oil and $3.50-plus gasoline can not possibly part of a foundation upon which a robust recovery can be built. Chairman Bernanke's comments before Congress yesterday then, takes the stating the obvious title from Chancellor Merkel, when he described the economy as facing "headwinds," and its consumers, "challenged." The Chairman must be a reader of this space when he echoed what we have been saying for a year, stating, "risks remain that developments in Europe or elsewhere may unfold unfavorably and could worsen economic prospects here at home." Do not prepare for an imminent collapse in oil prices though, participants have continually been able to place a premium over on prices for the past two yeas, despite economic reality.


Petroleum Tech Talk     

Crude oil prices posted a new low since the recent peak at 95.44 yesterday. The 200-day MA at 96.22 was also violated, but settled above. The downward channel is intact and so, the bias remains for lower, but a meaningful break of 90.52 is required for continuation towards last Fall's low of 74.99. Still, the market broke the congestion between 98.00-102.00. But while there is no technical rationale that the downward slope should not continue, nor are there compelling reasons that consolidation has decisively concluded, so test towards the top of the channel may repeatedly occur. Friday sessions sometimes take away from the week's direction, but a continuation to new technical markers may signal more of the same for the subsequent week.


Natural Gas            

The jolt higher after EIA posted a larger than expected pull from stocks yesterday show the kinetic energy of a still overwhelmingly short market. It is certainly a defensible position given the uncooperative weather and overproduction combining to push stockpiles towards record levels. The universal acknowledgment of those facts and the market's recent extraordinary response to any any positive shading to them may contain the first rumblings of a temporary bottom. As risk is perceived to be greater than the probability the market will surrender enough to make them endurable, the reluctance to join in them will rise; obviously. Certainly a weak foundation upon which to construct an argument for a rally's beginning, but one that may begin to gain currency if new lows take several session to post. A growing consensus of the inevitability of a 1.00 handle will probably make it less so.


Natural Gas Tech Talk   
              
Prices pressed higher, over 2.50 , and finished closer to session highs than to the lows. Our initial target after the initial counter trend, 2.231, went unchallenged, but we will keep our bias for lower for eventual challenges to 2.13 and then the 2002 low of 1.96. However, 2.231 may serve as a temporary bottom for a coming period of consolidation, the top of which may be the recent high at 2.844. We will wait for settlement over that to shift our bias for higher. In the meantime, there should be resistance at 2.606, the 13-day EMA. A longer view would hold that the long decline 6.10 is still underway and the bounce shown on the chart is probably a continuation signal.

source: KilduffReport.Com