Sorry i couldn't get the charts up but this is an interesting point of view. Just for infomation
Please do your due diligence.
Energy OverView January 23, 2011
ALERT: DOLLAR RALLY STALLS OIL RALLY
|
Contract
|
Month
|
Last
|
Change
|
BIAS
|
Comment
|
|
Crude Oil
|
January
|
99.21
|
.88
|
Neutral
|
Breach of $100 shows cracks in upward momentum.
|
|
Natural Gas
|
January
|
2.403
|
.011
|
Neutral
|
Downward momentum slowing, reversal imminent.
|
|
S&P 500
|
March
|
1312.50
|
1.75
|
Neutral
|
Favorable data temproarily boosting market.
|
|
EUR/USD
|
Spot
|
1.3026
|
.0095
|
Neutral
|
Hope for debt rescue plans lifting euro.
|
MacroView
The euro zone fixes continue to lift the global equity markets. There seems to be precious little concern over Greece’s looming debt payments on March 20th. The latest iteration of the plan, with a cash component and escalating interest rates, still requires 100% approval from the bondholders, which would seem impossible to achieve, especially with a core group of holders rooting for a default and an attendant CDS payout. The euro is back above 1.30 to the US dollar. There is talk of additional stimulus in the euro zone. The gains in the S&P have not been accompanied by strong volume. Also, various measures of bullish sentiment are running at recent highs. So, while we still would not sell, just yet. We would recommend lining up an exit strategy or obtaining some downside protection. Unfortuantely, as is their wont, market disruption events come like a bolt out of the blue, and sentiment could change rapidly on data point or two that shows the slightest flagging in the US economy. The poor Philadelphia Fed number presents as such a warning sign. With Davos and the State of the Union, the focus will be on policymakers, and the headline risk is therefore elevated this week. In particular, the markets are keen to hear if a new housing plan is trotted out by President Obama. Supposedly, a major settlement among the banks, the Federal government, and the several states was awaiting the SOTU. That could give the financial sector another lift.
Petroleum Market
Selling in the Asian session continued Friday’s late sentiment, but that was reversed as the opening of the European session approached. Investors seem to have perceived that a puff of white smoke could be seen emanating from negotiations going on with the bond holders all of last week and through the weekend. Still the market is contained within the familiar range that has described trading since early December, with few signs that a break in either direction is imminent. What comes from today’s meeting of EU finance ministers may just provide the catalyst. The major directional influences are the agenda. What will be the sum and substance of potential sanctions on Iranian oil exports, and measures to overcome Greece’s debt debacle will drive crude oil price action. The level of volatility then, will be a product of how headlines are absorbed, as there is nothing of substance on today’s economic calendar to divert participants’ attention. It is perhaps telling though that prices are below the psychological level of $100.00, particularly with the euro riding high. It may indicate that the current dose of “hope-ium” is woefully insufficient.
Petroleum Tech Talk
Friday’s break lower to erase the week’s gains continued in early Asian trading. Sellers were constrained however by lower volumes associated with with the Lunar New Year. Consolidative action off the recent 103.37-74 resistance area is still tracing out. Overnight price action moved below temporary support at 97.70 to 97.40, which we do not consider a meaningful break, especially with the subsequent rebound of over $2.00. A move over last week’s double top at 102.24 may presage a test of recent highs. A break above resistance there should open the way for a test of congestion in the 105.00 area, where a break may generate enough momentum to carry to last year’s highs near 115.00. A significant break below 97.40-97.70, particularly if it occurs on settlement, should open the way for a test of 90.52. This is the point where prices broke higher to 103.37.
Natural Gas Market
The acceleration of the price slide seems to have slowed a bit. Certainly, the bearish drivers are still in place, particularly the diminution of the weather’s ability to have significant influence. Ergo, we have to conclude that the initial rumblings of an exodus have commenced. NOAA’s most recent 8-14 day forecast, while still showing a good portion of the country expecting above normal temperatures, also shows that the thermometer is moving towards more normal readings. Under normal circumstances, this wouldn’t be much of a motivating factor for potential bargain hunters, but circumstances are far from normal. Specifically, the markets has experienced about a 25% loss in value and open interest is saturated with short positions. A perfect set-up for a reversal. How far it might carry is a function of how weak recent shorts are. The enthusiasm of the sellers, as expressed in the rapidity of the fall over the past few weeks, makes us very wary. Prices very well may have further to fall, but prudence dictates moving aside until the weakest of the shorts are cleared out.
Natural Gas Tech Talk
The market is grossly oversold. This sort of condition can prevail for some time, but a short covering rally is imminent, and will occur when it is least expected. We recommend that stops on short positions be placed very tight. Perhaps, the former target of 2.409 would be prudent, but at the very least, the 13-day EMA at 2.667 for the March contract should serve as an upper marker, and will suggest the mover lower has concluded. With fundamentals so overwhelmingly bearish, we doubt that upward momentum, only propelled by short-covering, could carry to 3.00 and above. Once, the longer term downtrend resumes, there is a possibility that the 2002 low of 1.96 and below is possible. Trying to ride a counter trend move is more about bravado than skill or luck and could prove very costly. New shorts could prove equally painful at current levels, as well. Stay with current positions, but be ready to cover quickly