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Thursday, December 16, 2010


Yesterday we saw for probably the first time, rising rates pressuring mlps and we saw the index fall nearly 6 points on a day where the overall market traded flat in a very tight range. I thought it might be a good idea to see where we are on the charts with respect to the 200 day moving average so i changed it this morning from the usual 34,55 & 89 day to 89,144 and 200 day expotential moving average. And you will notice that we haven't been there since April and we are no where near it now.

We are at the very bottom of the trading range we've been in for the last several weeks. The rate spike on the long bond and 10 year should abate (i thought it would have already) and a pull back in yields in the ultra short term is in order. So we must watch carefully here because if mlps continue to weaken, it could be the beginning of a wholesale move out of this space and into other things.

Yesterday i posted the line "more stock for sale" and was asked by reader JCarroll to elaborate on this. I was trying to say that mlps would go down as sellers rotate out of interest sensative and into other areas. However one must also address the fact that MLPS have been using their high stock prices and currencies and many have already come to market and done stock offerings. Not all have, however and if there is a threat to their currency, the rest of the group will probably come to the table. We have been in a bull market in mlps for 2 years and at some point the outperformance has to come to an end. By the way if the rate spike continues, we could see some sort of accellerated move occur, which translated means a big down day in MLP land. But for now we watch.

This morning begins with yields lower ahead of jobless claims. Stock futures are flat to a little higher. Energy is a little lower ahead of nat gas numbers and nat gas itself is selling off ahead of the number. No news on the mlp corporate front and no upgrades or downgrades so far this morning.

Eyes on the bond market folks as the open approaches.

1 comment:

jcarroll1948 said...

"mlps would go down as sellers rotate out of interest sensative and into other areas." I agree.

For what it's worth, I think the dual events which may unfold over the next month, sellers exiting the space and MLPs coming to market with new shares at what they perceive as the high of this cycle, can likely set up good entry points in Jan, just prior to the Feb distributions.

I am keeping some powder dry to take advantage of this likely opportunity.

Thanks for the elaboration of your comment from yesterday, and for the blog,