Europe continues to be suffering from very high unemployment and the ability of policy makers to ignore reality. Greece has defaulted. The Greek paper that the banks hold of is worthless. The Troika says, “Oh, no, that paper that will be paid on its maturity.”
Greece has defaulted many times in the past century. They have again, but no one wishes to acknowledge it. When you give a country 10 years with no interest payments and a lower interest rate what about that is not default? Moreover, Italy’s unemployment rate has risen to a record 11.9%, up 2.3% from October.
Moving to the south a bit, Egypt has completed the writing of the new constitution, which will be presented for a referendum to the people. The Muslim Brotherhood is forcing a confrontation with the judiciary. The referendum is an end around the dispute. The people rightly feel their government is being stolen from them. A power play is on that will not end well.
The line in the sand has been drawn for Iran. The U.S. diplomat to the IAEA board has put the country on notice that they until March for Iran to start cooperating with the IAEA. The diplomat, Robert Wood, said that if there is no breakthrough by then, the U.S. will work with the other members of the council to pursue appropriate action. There was no definition on what constituted appropriate action.
CRUDE: Hi: 88.32; Low: 87.47
Our model for Friday had support at 87.50 to 87.30. That zone has held and Jan is approaching the high of Thursday. It will be a headline mine field today with politicians in Washington trying to get sound bites for their constituents. Oh, isn’t it interesting that congress has yet to pass a bill making illegal insider trading by Congress? This is an observation and not cynicism, NOT. We see Jan moving up to a potential double top at the 88.70 level. The bulls really need to punch through that level to get a rush to the 89.50 to 89.80. There is very strong resistance just north of 90.00. That does not mean we think it gets there, but minefields are indiscriminate. The minor downside pivot to this formation is 87.70. The key downside pivot to the intraday chart is 87.40. The spreads have turned to firming. Jan-Jan has moved higher by 50 cents from Thursday. We are not sure this represents tightness or some hedge funds playing a market turn around, but it is not a negative indicator. We view Friday as a two way market with potentially expanded ranges.
BRENT: Hi: 111.13; Low: 110.25
Jan has a similar pattern to that of WTI. It appears that it is consolidating to work higher in the very short-term. This model is based on 110.00 holding. The minor upside pivot is 111.60. That will be a boon for the bulls but the grabbing the golden ring will require a pop through 112.20. An intraday break of the level will net a rise to 113.00 to 113.25. This will be a two way market. The key downside pivot to the intraday chart is 109.40.
RBOB: Hi: 2.7336; Low: 2.7150
Although we were looking for Jan to find support at 2.7050 top 2.70, it actually has held above that level. It appears that Jan will have a new high to come. With a break of 2.74, it is likely to pursue a rise to 2.76 to 2.7650; a break over 2.7725 will suggest a climb to 2.80. The minor downside pivot to this model is 2.7150. Puncturing that level will drop Jan initially to 2.69. The key trend support is 2.6625. This too will be a two way market. Buy the dip, sell the rip.
DIST: hi: 3.0658; Low: 3.0455
Jan is holding support that suggests higher prices to come. This model is based on Jan holding 3.0450 before moving to a new high. The upside target in this case is 3.0850 to 3.09. The key upside pivot i s 3.1025. The key downside pivot to the short-term outlook is 2.99.This will be a two-way market as well. Beware of natgas, It will be more sensitive to weather reports.
NAT: Hi: 3.658; Low: 3.622
We shall not mince words: We were made to look like Wrong Way Corrigan, the man who was supposed to fly his plane back to California, but wound up in Ireland. Jan is poised atop a very important support level for the continuation chart at 3.62. This pattern appears to be close to complete for this leg down. True, the downside pivot is 3.58. If I were to trade what I see, I would be a buyer down at these levels with a tight stop. However, I thought that would occur yesterday at ten-cents higher. Our confidence level that 3.62 will hold is weak at this time of morning, but our interest is piqued. The minor upside pivot that will confirm a bottom to this decline is a break above 3.70. There is trend resistance at 3.78. We should mention that a break of 3.58 will have little in the way of support until the 3.41 to 3.39 zone.
GASOIL: Hi: 950.50. Low: 944.00
The intraday pattern appears to have higher to come. This is based on Dec holding 944.00 before moving higher. If that is seen, Dec will pop through 953.00 to see 954.00 to 955.00. The key upside pivot to the formation is 959.00. However, a daily settlement above 960.00 will be a bullish event. If the minor pivot gives way, a drop to 938.00 is viewed.