After a Chinese stock market halt, the NYSE going down for most of the day, a global airline grounded due to technical glitches and yet another extension in the Greek bailout it appears that markets globally have stabilized and are trading higher. Chinese equities have stopped their five day decline that was putting a negative spin on commodity demand globally at a time when demand was already in question due to European debt contagion issues. Here in the US, selling for the week has felt somewhat reluctant, as if to say that we have to go down based on the global picture though the moment the gray skies part it will all end up being a strong buy opportunity. For now that appears to be the case across a wide swath of commodities from equities, to bond yields to energies.
The supply picture was really a non-event for the most part with very small better than expected builds in supplies. For the moment, the global demand/confidence will be the driving factor in crude related energy pricing. While we have broken out of the recent range to the downside, the 50 dollar support appears to have some believers as it has held through some rather daunting sell offs over the first part of the week. It certainly makes sense for the price discovery to take a step down to the low 50's rather than low sixties based on supply and demand issues though one would be hard pressed to make a strong case that the fundamentals have changed enough to justify sustained trading in the 40's. Continue to look for dips to develop long defined risk positions in order to take advantage of resumed risk on overall market sentiment that most assuredly will deliver higher energy prices, even if only back to the mid 50's.
Natural gas storage data is due out today and the beleaguered commodity could use a shot in the arm of volatility. The August contract has been stuck in about a 10 cent range for a week now as the price discovery has been very muted while the bigger picture commodities have been frenetic. Today's data could be the catalyst to see some trade out of that range. With 86 BCF expected, a print in the high 60's would most likely produce dramatic buying while a print over 100 would probably be needed to produce any further decline in the price.
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