Watch For Energy Buying Pressure Today And Tomorrow

On March 27, 2013 by TradingDesk

US stocks surged again Tuesday, cheering strong housing data, and ignoring a plunge in consumer confidence. The rally brought the S&P 500 within a couple points – again – of its all-time closing high. Then overnight – again – the Europeans threw cold water on the rally, this time Italy taking center stage after a bond auction failed to raise the funds desired. The EUR/USD fell sharply, and is now trading at its lowest level since November, driving a selloff in stocks on both sides of the Atlantic. Technicians continue to suggest that the loss of momentum at such lofty levels, and the inability to break to new record highs for the S&P is setting up a multi-year top in stock prices, while many others think this is just another euro speed bump.

Energy prices are showing mixed reactions to the drama, with RBOB largely ignoring the move, instead focusing on Delta Airline’s refinery problems following a power outage Monday to rally a nickel yesterday, and another 2 cents this morning. The move has broken through short term resistance this morning, and if sustained sets up another 10 cent rally into the 3.20s. HO remains attached at the hip to Brent crude, and has been unable to bounce off its lowest values since August. Monday will prove critical for the contract, as the May (ULSD spec) contract is currently trying to break the 200 day MA. If the new contract can open above that level, we may have seen the lows in HO values at $2.85. If not, there may be another 15-25 cents to fall.

Tomorrow marks the end of trading for the month, with Good Friday being one of only 3 days all year that commodity futures are closed on both the Nymex floor and Globex electronic sessions. Energy values tend to tick higher ahead of long weekends, so look for some buying pressure to emerge today and tomorrow. The API report last night showed inventory draws across the board, and if confirmed by the DOE today, that natural buying pressure may pick up steam.

CLICK HERE for a PDF of this morning’s charts

 

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