NATGAS BOTTOM? MARKETS ON EDGE!

Heading for a long vacation for all of 4th of July Week so posting will be minimal the next 10 days. Its been pretty minimal as it as lately as work schedules and family issues have been a bit overwhelming. So let me get to a few issues here going on.

Nat gas is staging a rally off what appears to be a significant bottom back in late April. What is very important is that we have broken out above 2.75 so we may be headed back to 3 bucks which for years was the old line in the sand. At least it appears that the nat gas market may try and get above that. Meanwhile take a look at the nat gas mlp etf and notice that this bottom in price has not rallied these stocks. In fact the reverse is true. This is something we need to pay attention to. Something else is going on here and it could be that maybe these companies have so reflexively hedged themselves for falling nat gas prices for years that maybe they are going to get caught short at least at this particular turning point. I guess we might get some idea on this come late July when earnings come out.

Meanwhile the dow and MLP chart are not inspiring. The mlp index seems to be getting ready for another trip down to 350 And the dow chart is moving in tandem.

These are not inspiring charts and i think the summer could bring us turmoil as Europe unravels. But its end of month, end of quarter, and end of half year and at least for the next few days we could see the usually nonsense of money getting moved around from A to B and then back to A.

 

Frankly its hard to see how markets can rally when you have a bond chart that looks like this. Those looking for a hopeful summer might be better off looking for it at the shore.

MLPS LOOKING FOR LEADERSHIP

Yesterday's mlp inde 6 point gain aside the mlp tape has been holding that 350 bottom so far but looking at this chart, the bounce to almost 370 has been pretty much as expected.

The rally back has only taken us to the first decending downtrend line and we will probably hit it this morning. At least we will get to see whether this is a brick wall for the index. I continue to be disturbed over the fact that the group is no longer a market leader and while the dow chart looks a little more positive, mlps continue to signal that there may be something wrong with the overall markets.

With 6% plus yields and a 500 basis point spread against the 10 year why are investors staying away? Is it the overall bear market that has developed in energy stocks as a whole? Crude oil has moved from 110 to 80 bucks in a big hurry. Just as mlps signaled that things were going to improve in 2009, i think mlps are telling us that things are going to get worse over the coming months.

This morning we see markets flat ahead of the fed which may be a market mover if they don't give markets the QE3 heroin. Crude this morning is down a little while nat gas continues its rally which has been impressive but for now, still looks like a bear market rally.

WHERE IS THE BOUNCE? 

We have seen no real bounce in MLPS which have been in a downtrend since the late February top and after hitting 350 notice that the rally back has been miniscule. This has come with the dow industrials bouncing from 12,100 to 12,700 and they have nosed above the moving averages which have only just recently crossed and turned down.

Frankly i do not regard this move as a positive. Something is clearly different here then in prior sell offs and rallies in that MLPS are no longer leading. Rates continue to hover near record lows so the price pressure is not coming from that sector. However we may have seen a real collapse in oil prices. Notice the brent chart has really fallen off a cliff here as we have gone pretty much straight down from 125 to 95 with hardly any sort of important bounce. Is the crude oil market signalling are real falloff is coming in the overall economy? Certainly the world oil price is telling us that Europe is in recession. China demand continues to drop. At least all this is good for gasoline prices but it is pressuring energy stocks as a whole. MLPS are probably suffering from the bear market in energy stocks as a whole. But keep an eye on the 10 year yield because if bonds continue to rally and we break below 1.50% it could be a real sign that the economy is headed for a tailspin. Yield spreads in mlp land continue to hold near 2012 highs of around 500 basis points. Anything higher could spell trouble.

Nat gas meanwhile seems to have put in a bottom around 2 bucks and we came back down to just above that last week and now we are rallying rather nicely and with some volume which is good. Nat gas needs to take out 2.80 to make this something more than just a bounce. The chart certainly is beginning to feel like it is trying to put in some sort of meaningful longer term bottom. Certainly the fact that no one believes is a positive.

This morning we have slightly higher stock futures while crude is down and so is nat gas. No news to speak of this morning and no upgrades or downgrades. Yesterday we had Markwest profiled on Mad Money. Its worth a look since Markwest (MWE) has been one of the better performing mlps of the last few years.

Sorry for the lack of posts. Lots of family stuff going on makes regular blogging difficult.

NOT LOOKING HOPEFUL IN MLP LAND

The bounce we have had from the push down to 350 last week has been rather unimpressive as we could only seem to manage a trip back to 365 and while the overall market attempts to find some sort of footing, the index here is signalling to us that things in mlp land are not all that well. The bottom line is the bottom and there is no sign of one here. The index is down today by about 1 point as it catches up from yesterday where the market started sharply higher and closed sharply lower. Sometimes it takes us a day to make things even.

Its all about Europe of course and there is no sign of that problem being solved anytime soon. In fact the action this weekend and the market's reaction to it are telling us that troubles lie ahead.

Sorry for the lack of posts but between work, family issues, and rebuilding a deck, its been really difficult to find the time to write.

THE BOUNCE!!! 

The bounce has occured and it has been a fairly nice and predictable 5% rise for the mlp index from 350 to 365. Looking at this chart with the downtrend its going to take a move above those declining moving averages to get me excited here. The rally was going to happen and if the selling resumes and begins to accelerate again it means probably another trip down to the 350 level. That will happen if Europe begins to unravel in a big way. They seem to be walking along the edge of the cliff every day. My question is if the unraveling really happens, what is it going to look like? And what exactly sets it off. Do we wake up one morning with futures down 1000 points? We certainly hope not. I just wonder what the actual event will be that could set the market spiral ala lehman in motion.

No news for mlps this morning and no upgrades or downgrades. A couple of observations. Crude is down 2 bucks this morning to 82 dollars. If the rally of the last few days were meaningful i think you would have seen oil back at least into the 90s. Crude did not move in this bounce. Nat gas rallied to 2.50 and now it looks like we may be headed for another test of the 2.00 level. Is Crude signalling real trouble in the economy? The ten year is under 1.60% this morning so i guess we try for 1.50% again. Barrons calls this the opposite of irrational exhuberance as irrational despair and thats what the bonds are telling us. And here is my prediction for tomorrow...I'll Have Another wins the triple crown. He continues to improve and all of the other shooters have problems of one sort or another that puts them one or 2 levels below the class of  the Derby and Preakness winner.

NO BOTTOM IN SIGHT!

The 2 charts above pretty much tell the story in mlp land and its not a pretty one right now with the index breaking down 8 points yesterday and approaching 350. Support to me on a weekly basis is somewhere around 320 which is where mlps bottomed last August. There seems to be no support here and the index won't be helped today with Kinder Morgan (KMP) doing a secondary and the stock down about 1.70 points at the open. It is particulary distressing to see yield spreads in mlps blowing out a bit here. The spread on Kinder Morgan is a little under 500 basis points and that is awfully high if markets were behaving well. Now we are no where near some of the spreads we saw back in 2008 where those spreads blew out to double digits in many individual cases. But being up at these levels is something we need to pay attention to especially if Europe begins to really circling the drain.

The market indexes are trying to hold here at the open with the mlp index drawing a line in the sand here at 350 and most issues in the group save for Kinder Morgan are moving fractionally in either direction.

Down 212, Nasdaq down \60 and the MLP index is down over 8 points. All important support levels appear to be breaking. The Dow is now down for the year. The tape is not looking good. And with the 10 year dropping under 1.50% and mlps selling off hard, we are seeing yield spreads here blowing out to levels not seen since 2008. These are not good signs.

Dow at the lows of the morning down 190 and mlps are now below 360 down nearly 6 points. Just noticed the euro is actually rallying here. Gasoline at 2.66 in the futures which means 3.25 gasoline sometime soon.

BREAKDOWN! 

These are the charts we are looking at this morning just before the open and now we have markets in sell off mode.The employment number is point to recession. The 10 year dropped to 1.44% before the open and the dow opens down about 140 here.

The mlp index is down 3 right now and looking at that 360 level. Brent has broken below 100 dollars for the first time since last fall. So things are looking ugly this morning and we will see whether buyers will appear at some point. Enterprise Products Partners (EPD) got an upgrade but it doesn't matter as the stock is down with all the other mlps.

The dow is sitting right now at 12,220 which means all of the years gains have been wiped out.