CONSTELLATION DISTRIBUTION
OUTLOOK LIGHTS UP!

It is the last remaining dead man walking mlp out there as Constellation Energy Partners (CEP) never got back off the floor after the 2008 debacle where the stock went from 40 to 1. Since then it has been in penny stock land thanks to no distribution and no chance of one coming back anytime soon. However that should change this morning with earnings where the company seems to have righted itself by reducing debt and posting earnings. Most importantly is that the company indicates that it plans to consider resuming the distribution which in the end is the bottom line for the markets. We have only one trade in the pre market with the stock up 94 cents on 200 shares.


Meanwhile still no signs of a top in mlp land however i want to look at a few movers from yesterday. Oneok LP (OKS) did a public offering and a private placement of shares yesterday which took the stock down a couple of points and its down again this morning in the pre market. Also Kinder Morgan (KMP) seems to be having a little trouble getting above the 90 level lately. The index itself was down nearly 3 points yesterday. Nothing troublesome here yet but a focused eye here might not be a bad idea as this market rally overall seems to be getting a little long in the tooth and some day (gasp) we might actually have a couple of down days in a row. Since it is mlps that have been pretty much among the leadership in the last 3 plus years, it might be logical to assume that this group may be among the first to start any type of serious selloff.

ALL TIME HIGHS CONTINUE!

The unrelenting march to new all time highs continues for mlps and we are but another 10% away from seeing a triple of unit prices since the October 2008 low at 145. The movement of cash into anything paying yield continues and it has been totally justified if your mlp has been growing distributions at 2 to 3% quarterly clip with no signs of stopping. Otherwise you wind up like Inergy LP which has seen its stock price cut in half as the distribution appears unsustainable. There are plenty of reasons to worry that the march higher could come to a halt at anytime or even (gasp!) drop for a few days in a row. You get the sense that everyone thinks markets can only go up these days. And that alone should be cause for concern.


Nat gas and oil continue to go their separate ways though nat gas at least seems to have stopped going down. Brent on the other hand has been up 6 out of the last seven days and is trying to breakout of this base that has formed in the past year. If 125 goes than look at above. I would think an event like that will be news driven and probably negative for equities overall.

In mlp land Holly Partners (HEP) is buying back its senior notes in a tender offer. The stock has been one of the better mlp performers of late. El Paso Partners (EPB) is putting up earnings this morning and DCP Midstream (DPM) will put their earnings up after the close.

Stock futures this morning are following Europe lower as the never ending Greece saga continues to...well....never end! Crude is pulling back a dollar on West Texas at 1o8 and Brent at 124. Gas here in the people's republic of NY is hovering around 4 dollars. Nat gas is flat at 2.55. The 10 year yield continues under 2%. Markets are due for some sort of pullback but betting on one lately has been a rather fruitless affair.

BRENT APPROACHING $125!

One has to wonder where we are going here as far as the oil price is concerned. Brent ICE which is the world wide price is approaching 125 which would be the highest close since last May. Up until now stocks, oil, and the euro have been moving together. But i think we are getting to a point where the price in crude is disconnecting from economic activity. It is about Iran and Israel and other mideast threats. If crude breaks above 125 it will be due to some sort of news event. Is the market telegraphing Israel getting ready to take out Iran? If that happens look for oil to challenge its July 2008 high around 150 with gasoline at 5 bucks a gallon. This cannot be good.

MLPS open a little lower this morning. No news and no upgrades or downgrades. Moves at the open are small in nature for the most part. Euro markets are lower. Metals are higher and the dollar is higher against the yen but lower against everything else.

New recovery highs for the dow, and nasdaq but not for the transports which are down over 1% today and that chart is not looking good these days.

MLPS down a fraction at lunch time. Plains All American (PAA) is down 1.25 and Alliance Resource (ARLP) is down 1 and change as the biggest losers in the group. EV Partners (EVEP) and Oneok LP (OKS) lead the winners list up 1 and change each. Everything else is moving fractionally in either direction.

THE WINTER OF CONTENT!

The winter of discontent weather wise is in Europe with snow and bitter cold while the US experiences the opposite pretty much coast to coast. As far as markets go all are happy these days with the US markets the happiest and the march to 3 year highs on the dow, 11 year highs on Nasdaq, and all time highs on the mlp index continues.




At least with regards to the MLP index there is still no sign of a top and we are at 408 on the index as we begin a holiday shortened week. Point and figure charts have been bullish for months and have an upside target on the index at 475 which is another 20% higher from here. The key for mlps will be the 10 year rate which is at 2% this morning. If the 10 year begins a march higher then i would look for some pressure to come into mlp prices but so far the 10 year has not been able to break above 2% for any long period of time. 2.40% was the high back on October 24th 2011 and until that breaks, rates are probably stuck in a range which will be good for the group.


The dow chart meanwhile is doing its own adventure as it breaks above its 2011 high and heads for 13000 which is where it sits this morning. Futures are still pointing to a slightly higher open and we should see markets attempt to take that level out. Markets overall continue to take out every important level of resistance and i'm not sure what stands in the way of new all time highs all the way around. Still there is stress out there. Crude over 120 on Brent and gasoline approaching 5 dollars a gallon in California and 4 bucks here in NY are going to put the pressure on soon enough. But its okay because the government keeps telling us that unemployment is dropping and there is no inflation. The other technical stress on the chart for me is volume which continues to indicate that the same dollars are just being moved around the table.

In corporate news Williams Partners (WPZ) and Cabot Oil (COG) are forming a hub for nat gas in the northeast. Nat gas is still well under 3 bucks so why not while its cheap. We are only going to ship it overseas because we can't use it here. Otherwise its a quiet Tuesday morning with no other headlines and no upgrades or downgrades.

STILL STRADDLING 400!

MLPS are holding tight around the 400 line. Except for Terra Nitrogen (TNH) which is now at 239 and up another 15 dollars (the apple of mlps!) most mlps are moving fractionally in either direction.

The dow is down 20 points right now but the nasdaq is up 25 with Apple at 525 and going parabolic.
The nasdaq 100 is up 11 out of the last 13 days. There is some speculative fever developing here so i would watch the tape carefully. This can't go on for much longer without a sizeable break. Meanwhile back to mlps which are just doing their own thing in here but the chart does appear like we are at a place where tops could be formed. Still no sign of trouble. But again the overall tape action today has me a bit distressed.

Nat gas meanwhile is back dow to challenge its lows around 2.20 and there really is no reason for nat gas to do anything other than breakdown below this level. Non existent winter and 100 years worth of supply and growing are not exactly bullish reasons for prices to go higher.

MIRROR MIRROR ON THE WALL
WHO IS THE CRAP-IEST MLP OF ALL?

The answer of course is everyone's favorite crap stock Terra Nitrogen which has broken out above 200 and sits at 225 this morning. Its usually not one of the mlps i pay close attention to but its noteworthy to have an mlp trading in a place where Apple Computer once traded. You don't have to be a tech stock to achieve double par! And with demand good here no doubt we will see this one go even higher as long as the market holds together.

Meanwhile back in the oil and gas patch the mlp index has been straddling the 400 level for the last couple of weeks and we are at a breakout or fake out point here. Tail winds are still bullish so unless we get an overall market reversal of unusual magnitude the path of least resistence is higher. We have passed the ex distribution days and checks are in the mail to arrive over the next couple of days so enjoy these fabulous yields which continue uninterrupted.


Dow chart remains in bull mode here. No sign of any pending top though i have noticed that the vix is back near 20 after getting down to 16 last week. I suppose some people are a little nervous and we have a dow 15k front page of Barrons. So far this morning some selling with the dow down 40 and the nasdaq down 15. MLPS however are up a fraction near 401. Buckeye Partners (BPL) Atlas Pipeline (APL) and Markwest (MWE) are the biggest losers this morning down 50 cents or so. Buckeye got downgraded to sell yesterday by Citigroup. Nustar (NS) Energy Transfer (ETP) and Holly Partner (HEP) are up fractions; about 50 cents or so as the biggest winners with everyone else somewhere in between. Nat gas is up 3% for who knows why. Crude is also up over 100 bucks again.

Sorry for the lack of posts lately but life has been quite busy and i'm trying to settle into a new schedule. I appreciate your patience.

IS IT A BASE OR A DIVING BOARD?

I suppose the answer to the question posed above is going to depend on whether the world circles the drain or not. That 1.69 bottom from last October has held on several recent attempts down and the bond market is testing the top of the range in yields as it sits around 2%. It ran to 2.40% back on October when Europe solved its problems (again). 2.04 puts us above the 34 day moving average for the first time in awhile. The question for me is whether the yield rise is in response to genuine economic activity improvement and the end of the flight to safety trade. Or is something else?

Since the MLP index has been in a stair step ascent for months lets see if we can get clues from here since it is going to be rate sensitive. So far 400 has held as the top but the chart is not exactly telling us anything bad here. Trading has been sideways the last 2 weeks as traders move money into riskier assets. So at least for now we have no impending doom being indicated here.



Now back to the something else. This is the S&P chart and i would like to point out a couple of things. One is that we are back almost to the same spot we were a year ago around 1350. That Feb top last year began a sideways move that built the spring top and then followed by the August meltdown. I don't think anyone would argue that a pullback here would necessarily be a bad thing.
However look at the bottom of this chart and notice how subdued volume continues to be. Its as if the same poker chips are basically being moved around the table with no new players coming in. Now what if the lack of volume is a result of liquidity being squeezed out of the system in spite of the fed actions. And what if the rise in the 10 year is being caused not by an end to the safety trade but because we are at the beginning of a world wide liquidity implosion? At least its some food for thought here going foward. Make no mistake that for now the path of least resistance remains higher. In fact if the S&P takes out 1350-1360 decisiviely than i think we could make a run to new all time highs. But there are ghosts out there.

Stock futures are higher again this morning on that endless waiting for the Greece deal that never comes but nobody really seems to care about anymore. The stock Euro trade continues tied together and the Euro is a little higher around 132 this morning. Nat gas is testing its bottom again and if it breaks, look for a 1 handle. Oil is making another run to 100.

THE ODD RELATIONSHIPS!

Charts when you really think about them tell stories. This morning we have up three charts that you might normally see here so lets see what stories these charts are telling us and if any of them can remotely tell us where we are going.

Above is the 10 year. Notice the spike bottom at 1.69 back in late Sept/early October which also marked the market bottom (October 4 to be precise). From there we had a spike up to 2.40 when we learned from the Europeans that their debt problems were solved. Since then its been lower highs and 2 tests of 1.80 and so far the 10 year remains under 2. Europe's problems as we know are far from being solved.


Now we have the dow chart which has gone to 3 1/2 year highs as of Friday's close as markets here have figured out that Europe is Europe and while things are not great here, they are not falling off the cliff. So with everyone bearish markets took the path of least resistance and that was to move higher.

Now we have MLPS which really didn't have anything to do with Europe but followed the market down in August and September but then rebounded to new all time highs and now has been struggling with 400 on the index.

What does this all mean? Well quite frankly im not sure. The bond market seldom gets things wrong and it remains stubbornly under 2. It still seems to think Europe matters. Our stock market has pretty muched shrugged all of it off and is looking at stronger domestic data and moving up. MLPS which are essentially bond proxies were actually down in the face of last Friday's stock surge. I think that is mainly because people are moving into growth and away from the dividend payers as risk appetite appears to be increasing. MLPS not going to new highs here could be a lead signal that bonds are finally topping out.

In the end what do we do with all this? Honestly im not sure. Its hard for me to envision that with the dow at 3 1/2 year highs and nasdaq at its highs closed since way back in late 2000 that markets have more upside, but i though that many points ago. More people have been left dead and buried in the last few years on the notion that the secular bull market in bonds is over. So in the in end we have MLPS who just go about doing their business of moving oil and gas and raising distribtutions (for the most part) every quarter. To which the investor should just play along on the bull side until the bell rings that the party is over. So far im not ready to ring that bell but the dishes are being washed and the dessert has been served. It is getting late in the game.

Stock futures this morning are down at last check as Euro worries are around this morning about whether Greece will or won't default. Thats pretty much the same worry for the last 2000 points of dow upside. Oil is down on the idea that Iran may or may not attack Israel and Europe may or may not embargo them. Nat gas seems to be trying to put a floor around the low 2 dollar range as it has held that area twice. Its a rest stop on the way to zero. And the Euro is lower against a rallying dollar and rising bonds. So after a lower open my guess is that stocks will find a floor and try and move higher as that has been the recent trend.