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Tuesday, September 06, 2011


No question that the markets are in turmoil these days and it appears to me that 11,000 on the dow will not hold and then we will test and break down below 10,600 which was the August low to a trip eventually below 10,000. There you have it folks. I have it all figured out! Now set your trades and wait for the October trading bottom!

Somehow i doubt it will be all that smooth but certaininly today looks painful from the start as we catch up from being off yesterday and watching Europe take a big hit. One thing that is clear from the trading of the last few weeks is that MLPS are relatively outperforming the market. 320 is the August low in the group and a trip back down there is inevitable. Once again keep an eye on what mlps do in this downmove as they are among the last stocks to be sold hard before a tradable market bottom. This morning we have no corporate news items in the group and no upgrades or downgrades.

Through all of this we have another number to watch carefully and that is the 10 year yield which this morning is trading decisively below 2%. Now that we have a "1" handle on the 10 year, i can tell you that markets will not bottom until that yield stops going down. Where is the low in yield? Well outside of an out and out depression where yields go to zero (can you say Japan?), i would think that a dow trip to say 9800 would probably take is down to 1.50%. I suppose one can point to the yield spread of 5 points between that and mlps as a sign to buy mlps with both hands if we get there. Where mlps will be if we see 1.5 on the 10 year is another question. I would think it would be somewhere south of 320 on the mlp index, but perhaps not too far south.

Gold overnight went over 1900 bucks before pulling back. If this selloff gets really out of hand look for the selling to spread into the gold arena. That could be another sign to look at for a short term trading climax.

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