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Friday, December 16, 2011


Headline risk exists on both side of the equation today as we have some legislative moves in Europe overnight which has markets a little higher. Italy had a bill passed saying they will reform which we all know is a huge joke but lets give them the benefit of the doubt this morning. In Germany there was a vote to withdrawn from the ESM which was defeated. The headline risk on the downside may come after the European markets close as everyone seems convinced that S&P will be downgrading a bunch of European countries. I would imagine this is priced in to some degree but if S&P were to take some country down 2 notches instead of one or downgrade and leave the outlook negative, that might cause a sell off. But for now at least we will probably start higher. The Euro is rallying up half a cent right now which is still pretty much a dead cat bounce from the low of 1.2950 on Wednesday.

Above and below are 2 charts of probably the best performing mlps of this year. Oneok LP on the top has been moving of late in almost parobolic fashion. The company has done everything right as it expands in all key markets and continues to grow its distribution. Its up over 20% from October alone. Still you have to wonder if this parobolic move has the look of a year end pile on and if one were to want to buy here or add to positions it might be wise to wait for a pullback.

Sunoco Logistics has been another star performer and note that it has sold off a bit after the stock split 3 for 1. The pullback has been into support and has been pretty reasonable in nature. This company continues to also do everything right and while both companies mentioned have had incredible runups...there is still no sign that these stocks have topped out.

The weekly MLP chart is interesting. Noticed the uptrend that began 3 years ago this month has now evolved into a sideways move. The question is whether we are consolidating in here before another upleg begins in 2012, or are we building a longer term top and setting up for a larger pullback in 2012.
The answer i believe will depend on what kind of overall market we see for next year. If we continue to muddle back and forth with no major meltdown of Europe or China or whatever, then money will continue to go to companies that can grow distributions and payout yields of 5 to 6% or higher. However should we have major market meltdown due to Europe, China, or whatever, or if credit markets seize up in a big way, then i would look for mlps to sell off as well. And in this we have the big question. But at least for this morning we can put off that question as stock futures are pointing to a higher open. Commodities are dead cat bouncing except for natural gas which will soon be given away for free. The dollar is correcting this morning which is lending support. 1225 on the S&P seems to be the new wall of resistence as we hit it yesterday only to pullback. We will probably open there this morning and we will see if sellers will come in ahead of the weekend.

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