So, on Friday I made the rally call. The Dow Industrials were up 217 points. Now, after a conversation with TradeMaster strategist Jason Cimpl, I’m a little nervous about stocks following through.
Jason believes Friday’s rally was short-covering. His indicator? Oil.
Oil prices fell Friday, while stocks rallied across the board. As you know I expect stocks to rally in anticipation of the stimulus bill and then next banking measure. It is my opinion that investors perceive these initiatives as help for the economy in recovering from recession. Not a cure-all, just help.
If investors see light at the end of the tunnel, oil should rally too. After all, production has been cut. And despite growing reserves, oil will rally when it appears the economy will get back to growth.