Can We Build On It?

Although the GM IPO was disappointing, with the close near its low, the indices managed to hold up fairly well. We closed off the highs but held on to the vast majority of the day's gains. Breadth was better than 4-to-1 positive, and all major sectors were in the green.

We had a lot of bounces, but many of them lacked convincing volume. I'm told that GM, C and F made up 18% of total U.S. equity volume today, so there is no question where the funds were flowing.

The issue, of course, is whether we can build on today's bounce. We breached 1200 on the S&P 500 by a few pennies for a few minutes, but that turned out to be the key overhead resistance level. In a market that isn't as liquidity driven as this one, I'd look for a more convincing breakout of the 1200 level, which triggers buy stops and then a quick reversal. However, in this market, I'm much less confident that bounces will fail like they normally would because of the endless supply of cheap money provided by the Fed. The only way to deal with that sort issue is to make sure you stay very disciplined with new buys.

General Motors is going to be very interesting in the next few days. Institutional Wall Street needs this one to perform well, and that is even more so now that buyers today of 400 million or more shares are now sitting on losses. If they aren't successful in keeping the stock up, it is going to be an issue, especially since it sucked up such a huge amount of liquidity.