LOOKING INTO THE ABYSS

Which i'm sure is what everyone feels like around here. The MLP index chart is something akin to having teeth pulled with plyers and no novacaine. Yesterdays low was just a handful of ticks above the March low of 262.18 from which we rallied back to 290 in a hurry as the overall market rallied back. I wonder however whether we are done yet even though yesterday's reversal in the overall market was a nice thing. It was just one day.

In march it was the smaller MLPS leading the way thanks to private equity issues and now this time its the big boys littering the new lows list. Oneok (OKS) traded at 51, Buckeye (BPL) under 40, Nustar (NS) under 45. And the gps of Buckeye (BGH) and Nustar (NSH) are at levels not seen since their ipos.

Crude oil meanwhile has come back 10 dollars in 2 days from the high print of 145.89 and is up this morning by about 2 dollars. Bounce to be sure. Note the uptrend has not been broken yet and it would take a close under 109 in the USO to tell us that this sell off is something more meaningful than just another one of those fast pullbacks. It does feel different this time but i can't be sure. It closed yesterday right near that uptrend line at 108.46 (34 day moving average).

Remember kids i pointed out over the last few weeks that if big energy cracks it was going to take everything down with it. The double short oil and gas(DUG) has broken out of a base but what has been impressive to me is the enormous volume that is being traded here . On balance volume has broken out to a new high so this could be signaling a change in leadership away from energy and the like to perhaps something new.

At least the rise in DUG has offset some of the pain endured here although i must admit that my decision to start buying refineries like Valero (VLO)and Tesoro (TSO) has been a disaster so far. Lesson learn here. I tried to get too cute by reasoning that refineries would benefit if the oil price came in. Maybe that will be the case in the long haul but it sure isn't the case now.

The only thing that could make matters worse in here is some tragic coporate developement which gladly is not the case this morning. No news. Lehman is upgrading Penn Virginia Holdings (PVG) to outperform from market perform which in Lehman speak means if the market goes down it will go down less. That one has gone from 36 to 27 in a hurry during this correction as coal has crashed.