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Thursday, November 17, 2011


It seemed like it should have been a simple thing to do but i guess these things take time. Yesterday's news that Enterprise Products Partners (EPD) and Enbridge Energy (ENB) are going to get a pipeline from Conoco(COP) and reverse the flow of oil so that it moves oil from Cushing Oklahoma to the Gulf of Mexico. Its been the reason why US oil was selling for 25 dollars a barrel less than the world oil price. Now that the US is a net producer of oil for the first time in 20 years, we need to flow oil south to seaports. So US West Texas oil soar 3 dollars yesterday to 103.00 and the spread between US and the world prices has dropped to 8 dollars. It was a distraction however to the Euro obsessed markets who learned yestereday at 3:30pm that...gasp...US Banks might be at risk if Europe doesn't do something soon to stop the contagion. Im sure that piece of news was a shock to anyone living in a hole in the ground.

The move yesterday from 3:30pm to 4pm took the dow down nearly 200 points at the close. So i thought this morning it would be a good time to bring out the longer term charts to see what's going on. If its 2008 all over again note the huge 2 1/2 fold move of the MLP index. The index is not that far off its all time highs near 390. The index has been moving sideways this year between 320 and 390. Is this a long term top being established?

If we see a huge unwind with Europe or some big bank, we could be in for some trouble. MLPS have become a large part of many portfolios and if assets need to be sold, it could be troublesome. 320 is the first line in the sand that needs to hold. Otherwise 270 is right below.
The support levels on the dow are 10,400 which is the October low and 9800 where there is a ton of support. If that one goes its a long way dow to the March 2007 low at 6500. I'm just putting up the numbers in case the world comes to an end. Btw i did reshort again on Tuesday.

Europe of course is the focus this morning as French and Spanish bond auctions did not go well. Euro markets were lower ahead of the auctions and are now seeing new lows on the day. That is taking US stock futures with them. Oil is down today especially Brent North Sea oil which is down over 2 dollars and squeezing the earlier mentioned spread even tighter. Gold is down and the Euro is unchanged. Watch the trading closely today as we are getting close to very important support levels short term. 11,650-11,750 are where the moving averages lie. For the MLP index its within 358-361. For the S&P its between 1225 and 1230 and we could be there at the open. By the way as i type this post, its getting very ugly in Europe.

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