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Thursday, October 20, 2011


The charts are expressing the frustration of traders everywhere as we have been in this 1000 point trading range that has held up since August. We are getting moves that normally take six months or a year to play out in a matter of days. And we are moving with every headline that comes out from overseas. Something happened in Germany at 9am as the Dax Index suddenly sold off hard. Reports are circulating that Europe may cancel their weekend meeting. And our futures which were up have come back to dead even. And here we have alternated between gains and losses for the last 10 days.

Lets see if we can gather clues from other charts. The 10 year appears to have at least temporarily bottomed at 1.70 and if you want to use your imagination we have what looks like an inverted head and shoulders bottom. But chart patterns are always evolving and the pattern usually isn't obvious until its long been completed. And what use is that? Better for clues might be what the Volatility index is telling us. Notice that the VIX dropped to 28 on the first trip to 11,640 but yesterday intraday at the same level we were near 33 and closed at 34. So the VIX might be signalling some trouble is coming.

And the dow chart is at a place where the market has sold off hard before but we need to break below that 34 day moving average which is at 11,304 right now. And meanwhile MLPS continue to live in their own little world as we are up 8 days in a row and 9 out of the last 10. We are above 360 as pipelines have become all the rage. And pipelines that yield over 6% are seeing money flows.
But its all about Europe and if reports are true that Germany may cancel the summit this weekend you can bet that the market will not be happy about this and the punishment could be severe.

News this morning or leftover from last night, Kinder Morgan (KMP) annoucnes a distribution increase and earnings. Also we have TC Pipelines with a distribution announcement and Suburban Propane (SPH) announces its payout. Otherwise we are rolling along. No upgrades or downgrades. The market is ready to open and while the tape for mlps continues to feel strong, at some point the rally is going to stall especially if the overall market starts to fall again. And remember that mlps are usually the last ones that are sold so if a new downleg begins, they will offer us clues as to where the bottom is. And if it goes the other way and breaks out above 11,600 they will continue to lead. Never a dull moment.

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