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Monday, March 21, 2011


Took a breather Friday and we wake up Monday morning to rally time with the dow up well over 100 points so its an up open to start with. The mlp index came down to just above the important 350 level and held and now we start the day at 366 which is halfway to 380. News this morning on Buckeye Partners (BPL) which has shut down a pipeline in Pennsylvania due to a release. Not much as far as details go so far.

No other coporate developements this morning so far and nothing on the upgrade downgrade list so far either. Meanwhile the Dow Industrials look like they have held (at least so far) the uptrend line that you can draw on this chart, although it depends on how you draw it. But its been wise to give the bulls the benefit of the doubt in this rally. Also 1275 on the S&P has been made the make or break level and we are opening clearly above that this morning. So we can see moves above 12k on the dow and 1300 on the S&P on the open this morning and then we will re-evalute. Up opens are great but closing on the highs of the day or at least near the highs of the day is even better.

Meanwhile in long term rate land we have been going sideways pretty much bounded by 4.40% on the downside and 4.75%ish on the upside. The recent flight to quality move was nothing to write home about in the scope of things. If markets are righting themselves and the correction is over, we can look for rates to begin to move to the top of the range. In the end i'm looking for an upside breakout and maybe that comes with the end of QE2 or at least the market will soon start the process of pricing that in. The buying of the bonds by the fed was completely discounted before the announcement and i suspect we may see rates rise before the operation comes to an end on June 30th. And this assumes that we don't see QE3.

And no Monday morning would be complete without me saying something about Nat Gas which "appears" to have once again put in a meaningful bottom (among so many meaningful bottoms). The latest moves seems to be on the idea that oil prices are getting so high that there will be a wholesale market migration to nat gas in the long term.

We are are not particularly impressed with the notion that one wakes up one morning and decides " oh yes everyone move to natgas" but that seems to be the driving force in the markets for now. The chart appears to be putting in a rounding bottom out of what could be a long inverse head and shoulders pattern. But as has been the case for months now, rallies have met with sellers at the trading top around 12.75 and that needs to be taken out decisively before we can say anything positive on the long term trend.

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