Stocks are building on their recent gains on news that lawmakers on Capitol Hill have reportedly agreed on the outline of a deal to rescue the ailing auto industry. Also adding some fuel to Stocks is the announcement of a massive infrastructure investment pledged by President-elect Obama. Stocks have taken a beating this year with the Dow down 40%, S&P 500 down 40% and the Nasdaq down 43% - but these announcements, as well as next week's Fed Rate cut and pending decision on "mark to market" accounting are setting the stage, that we have been forecasting, for a major Stock Market rally in the first quarter of 2009. Remember that close to 30% of fund manager's holdings are in cash and the redemptions we have been talking about from hedge funds will need to be put back to work between January 15th and February 15th.
There are no economic reports due out today so Mortgage Bonds may take a cue from technical factors as prices once again test the best levels of 2008. At 11:00am ET, the Treasury will announce a new 3 and 10-year Treasury Note funding. And at 1pm ET, there is an auction of 3-month and 6-month Treasury Bills. These events could be a drag on prices later today.
We advise floating for now, but with support still a ways beneath current levels and prices already off the best levels of the day - it promises to be choppy and volatile.
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