This is The Wall Street Digest Hotline Update for Tuesday, December 2, 2008, at 6:00 p.m. EST.
Traders were apparently betting that Congress will bail out the auto unions, excuse me, the big three auto-makers. Stock prices soared right to the closing bell. At the close, the Dow jumped 270 points, closing at 8,419, while the Nasdaq rose 51 points, closing at 1,450. The S&P 500 gained 32 points, closing at 849. Oil closed $2.32 lower at $47.13 per barrel, and gold closed $6.50 higher at $783.30 per ounce.
The economic news is bad, and will get worse. The economic data is signaling a deep global recession.
The U.S. manufacturing sector hit a 26-year low yesterday. Treasury yields also hit record lows. GM auto sales fell 31 percent, Ford sales fell 30 percent, Toyota fell 34 percent, and Chrysler sales were down 47 percent.
On the plus side, there is a major market cycle bottom that is due on about December 21st. I expect to see a bear market rally to unfold between January 2009 and July 2009. This rally may or may not rise to new highs in 2009. This will be a temporary bear market rally, not a new bull market. I continue to believe all of the bubbles including commodities will burst by mid 2010. Nothing can stop the 2010-2012 bear market and recession because all of the engines of economic growth turn negative by the middle of 2010.
(A) If you are out of the market stay out and wait for a confirmed bottom.
(B) If you are market neutral with both long and short positions stay that way.
(C) If you are long the market, consider offsetting short positions using ETFs.
(D) If you are short the market, consider offsetting long positions using ETFs.
Now is a good time to read "The Great Bust Ahead" by Daniel Arnold, and "Dollar Crisis" by Richard Duncan.
Stay close to our Hotline Updates.
The next Hotline Update will be on Friday, December 5, 2008, at 6:00 p.m. EST.