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Monday, October 24, 2011


Is anyone really surprised by the fact that we are still sitting here waiting for Europe to come up with their plan, or the plan to come out with a plan, or the inevitable kicking of the can down the road. This is coming Wednesday, or Thursday, or something. Greece is unraveling this morning as their banks edge closer to zero. Euro markets are a little lower after being higher earlier after Friday's "stay of execution" rally. Meanwhile the dow continues on its unrelenting rally that began on October 4th. Paul Krugman has a very good blog piece this morning about what is happening there. Bank Of America/Merrill issued a warning over the weekend that another US downgrade is coming in a few weeks. All of this seems to be coming to a head here as the 2 dow charts that follow indicate.

Now you may be asking why did you put the same dow chart up twice? (go ahead...say it out loud!). Well if you look very carefully they are not exactly the same. I wanted to put up all the relevant moving averages to point out that Friday's action has us not only just above the very top of the recent range, but the moving averages that i use (fibonacci of course) are all converging on each other. BTW I included the 100 day moving average which is not a fibonacci number but is used by some market players. And i also use expotential moving averages rather than the simple moving average. Everything is folding on top of each other. If we go down from here in a big way i will predict that it will be at least twice as fast as the trip up. And it all hinges on Europe and whether their entire system unravels.

And through all of this we have had a terrific mlp rally from the low down at 320 on 10/4/2011. Since then we are up 10 days in a row and 12 of the last 13. Friday's gain was just 2 points on the index as attention shifted elsewhere. Last Monday we had that Kinder Morgan/El Paso deal which impacted the LPS of both companies. No such deal this morning. I want to go back to Friday where Crosstex Energy (XTEX,XTXI) did not hike their payouts which caused both stocks to lose ground. As is always the case in this group payouts are really the only important driver and you better raise them otherwise investors will move elsewhere. We have no news this morning of consequence so far and no upgrades or downgrades.

Stock futures were up, then down, now up as we get moved around by Europe. The market continues to trade pretty much tick for tick with the Dax and the Euro. Oil is up a little as is nat gas. Bonds are rallying a few ticks higher as well.

BTW for those of you interested my market short position is still intact and is getting excruciatingly painful to hold. I know the minute i give up will mark the end of the rally. I've held on this far i might as well wait until Wednesday. I still think the Europeans will do what they do best in the end and that is they will do nothing other than sip espressos while Greece defaults and the contagion spreads to Italy and Spain. If this problem really were on the way to being solved would we see the 10 year under 2.20% and the German Bund near 2%?

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