Holy oil glut! The markets were playing defense ahead of the first batch of earnings report and ahead of the API report. We saw the trade run for cover to the safe haven play of the moment. Money came out of oil and into the precious metals and the dollar. And it would have been a good thing if you played defense or shorted oil as the API reported another shocking increase in crude oil supply.

How shocking? Well so shocking that the market was a bit stunned as to how to take it. The API reported another humongous increase of 6.9 million barrels of crude! And if that does not shock your socks off how about if we follow up with a 2.9 million barrel build in gasoline supply. Now the only slightly negative part about this report was the fact that distillate stocks fell by 2.9 million barrels and the crude supply in Cushing, Oklahoma - the Nymex delivery point - actually fell by 835,000 barrels. Still the crude build is so staggering that it may actually challenge the validity of the uptrend channel that has guided the market pretty much since the beginning of this year. The rise in oil is totally dependent on the stock market, a weak dollar and it's dependent on a case of amnesia regarding supply. Can oil continue to ignore this glut of supply or will it go back to its seasonal uptrend?

Though I hate to read too much into light holiday trading markets, I do think that today is critical for the near term prospects for the oil market. Today’s weekly Department of Energy supply reports and the fortunes of the stock market will be the key for energy. We may have chased the market a bit on oil. “Patience grasshopper” yes, and it might be that oil should break hard before a final bottom. Short term we seem to have broken down. Position traders are patient for another opportunity to go long!

They are watching us! Who is watching us? Spies, that's who and they are intent to stop me out at the low of the day. No seriously, I jest. Except when it comes to your TV viewing. Then they definitely know when you're watching the Fox Business Network where you can see me every day!

The Wall Street Journal reports cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials .The journal says that the spies came from China, Russia and other countries and were believed to be on a mission to navigate the U.S. electrical system and control it. The intruders haven't sought to damage the power grid or other key infrastructure, but officials warned they could try during a crisis or war. I guess if this is happening it gives us a whole new definition of the smart grid now doesn't it. The Journal says that the Chinese have attempted to map our infrastructure, such as the electrical grid and so have the Russians. The espionage appeared pervasive across the U.S. and doesn't target a particular company or region, said a former Department of Homeland Security official. There are intrusions, and they are growing, the former official said, referring to electrical systems. There were a lot last year.

Many of the intrusions were detected not by the companies in charge of the infrastructure but by U.S. intelligence agencies, officials said. Intelligence officials worry about cyber attackers taking control of electrical facilities, a nuclear power plant or financial networks via the Internet. Authorities investigating the intrusions have found software tools left behind that could be used to destroy infrastructure components, the senior intelligence official said. He added, If we go to war with them, they will try to turn them on. Officials said water, sewage and other infrastructure systems also were at risk. A must read in Today’s Journal.