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MrTopStep Best of 2012: Unrest in Egypt, Cold Winter Forecast Pushes Energy

Henry Marchell


Those watching the recent events in Egypt can tell things are disintegrating rapidly. President Morisi has offered to a referendum on a new constitution. The radical Islamic sect, The Muslim Brotherhood, will be holding pro- Morisi rallies in Tahrir Square this Sunday. There will no doubt be those who feel they have had their government stolen from them. It has been. We suspect that there will be new powers for the president. However, the constitution is not yet finished being written and will need court Approval before the referendum. How this is going to end is anybody’s guess, but there will wailing and gnashing of teeth before it is all over.
On the weather front, we have been avid followers of Joe Bastardi, previously with Accuweather. While we are not meteorologists his arguments are compelling for a cold blast. This runs counter to what most other forecasters have been predicting. They have been looking for above normal temperatures. The issue is they use different models. The one used by Bastardi does not see the energy distribution by the current weather systems as fading. We awoke this morning to see temperatures 10 degrees below the Wednesday morning reading. Sharply colder air is forecast where temperature departures can run to 10 to 15 degrees below normal. Keep this in mind when trading.
Hope of a fiscal cliff deal in Washington continues to support markets. Once this issue has been resolved perhaps the markets can settle into trends.
And Wednesday the Fed stated that there is likely to be stimulus through 2013, with continued buying of mortgages and bonds. The stimulus thus far provided has not had the desired effects.

CRUDE: Hi: 87.68; Low: 86.65
With the prospects of QE until the end of time and the potential for a deal in Washington it is no wonder that Jan is higher. In fact it has hit our first target of the day at the 87.70 area. While we expect that Jan will retrace from there, it is likely that there will be another leg to the upside to follow. There will be minor support at 87.10 to 86.95. The minor downside pivot is 86.65. Breaking above the trend resistance will give Jan a look at busting through the key upside pivot of 88.60. That will be significant. We are a buyer of the dip.

BRENT: Hi: 111.00; Low: 109.45
Jan has responded positively to the news of more stimulus. However, it has hit our first target of the day at 111.00. This is trend resistance that will need to be overcome by the bulls. We expect a minor retracement from the trend line. This will set up support at 110.30 to 110.00. The minor downside pivot is 109.75. There is likely to be a new high for the day following the retracement. This will eye the key upside pivot at 112.20.

RBOB: Hi: 2.7535; Low: 2.7324
Despite the large build in inventories, Jan is higher on stimulus proposals. It has impulsed off its Wednesday low. This means that there has been a five wave move that is nearly complete. It is likely that Jan hits the 2.7150 level before retracing, however. The minor support is found at 2.70 to 2.6950. The minor downside pivot is 2.6875. If this pivot is removed a drop to important ratio support is found at 2.6750 to 2.67. We view this market as a two-way market, but it is likely to have an upward bias. The key upside pivot is 2.7350. The algos will push hard if it takes out that level.

DIST: Hi: 3.0400; Low: 3.0057
Jan has moved higher on the prospects of additional stimulus. The prospects of the cold weather has not yet been seen by most traders, we think. Nevertheless, it does appear that Jan has completed a leg to the upside and is ready to retrace. This model will put the retracement support at 3.03 to 3.0250. The minor downside pivot is 3.0170. The key downside pivot to the short-term picture is 2.99. Jan has just hit the 100 DMA on the contract chart. With a break over 3.06 Jan is likely to see the 3.08 to 3.0850. This will be a two-way market for Thursday.

GASOIL: Hi: 947.00; Low: 935.00
On Wednesday Dec held trend support at the 9.30 area. The pattern for Thursday indicates that Dec will move a little higher before correcting. The initial target is 947.50 to 948.00. The minor upside pivot is 949.00. The key upside pivot is 950 where the 100 DMA lies. There will be minor support at 940.00 with a minor pivot at 939.00. The key downside pivot to the intraday chart is 935.00. This will be a two-way market.

NAT: Hi: 3.815 Low: 3.737
Jan is testing its Wednesday low at 3.73 this morning. While we are bullish of this market, it is possible that the low for Jan Wednesday is broken. Initially this will yield a minor drop t0 to 3.70 to 3.69. The downside extension pivot is 3.67. The key downside pivot is 3.62. We are a buyer of the dip at 2.70 with a protective stop below 2.67. The minor upside pivot is 3.815. Busting through that barrier will net a rise to 3.90 to 3.91. The upside extension pivot is 3.93.

Released On 11/29/2012 8:30:00 AM For Q3p:2012
Prior Consensus Consensus Range
Real GDP – Q/Q change – SAAR 2.0 % 2.8 % 2.4 % to 3.0 %
GDP price index – Q/Q change – SAAR 2.8 % 2.8 % 2.8 % to 2.9 %

Jobless Claims
Released On 11/29/2012 8:30:00 AM For wk11/24, 2012
Prior Consensus Consensus Range
New Claims – Level 410 K 390 K 350 K to 430 K

Pending Home Sales Index
Released On 11/29/2012 10:00:00 AM For Oct, 2012
Prior Consensus Consensus Range
Pending Home Sales Index – M/M 0.3 % 1.0 % 0.5 % to 4.0 %

EIA Natural Gas Report
10:30 AM ET
Exp: -8 BCF
Kansas City Fed Manufacturing Index
Released On 11/29/2012 11:00:00 AM For Nov, 2012
Prior Consensus Consensus Range
Level -4 -1 -6 to 1