I ran the engine with the belt off and no squeal, which limits it to belt driven stuff. I can pretty much rule out power steering, a/c and tensioner pulley as they are far enough away from the approximate source of the squealing. But like I said earlier I am almost 100% sure the source of the sound is directed dead center above the water pump. If in fact it is the water pump making the noise, does it mean it is bad and may go out at any time? (pump is only 1 year old)

A water pump is only $7 at the local pullapart so I will get one just in case.
In the mean time I'll try the easy stuff like pouring water on the belt..

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1992 190E 2.3
150,000 Miles