Oil prices jumped 9% yesterday which helped propel the market higher. In addition, China reiterated its 8% growth expectations this year which excited the commodity market and infrastructure stocks. Investors spent the day trying to determine if the bear market rally was starting and could we see a surge of 10-20%? It looks like there was some false hope as markets ended up about 2.4% after rising as much as 4%. GE was the one stock that weighed down the DOW as there is a large concern about a downgrade and the effects it would have on GE Capital.
Today, the futures are weaker as China didn't increase its stimulus plan. There is also news about GM getting a qualified opinion from its auditors. This should not be a big surprise to anyone. Who thinks GM is a going concern without a major restructuring and a capital injection? Nobody who lives on this planet. We have said many times that the GM stock is worth zero so it is only a matter of time until it gets there.
The hope for oil bottoming may just be a big wish. Unless the economy stops declining, it seems unlikely that oil will continue its rise. We would anticipate a big increase when that moment occurs. Until then, we may see stocks hit some new lows. Hopefully we are wrong but since the market didn't end on its highs yesterday, we remain cautious but ready for a rally.
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