Oil Moves Above $45, Energy Stocks Rally

Oil is getting another bounce this morning, moving +5% higher to just north of $45. This is still well off the summer highs, but oil is at least showing some signs of stemming its recent declines.

The IEA has forecast a drop in global oil demand for 2008, which would be the first time demand has shrunk in 25 years. But OPEC has said that it will cut outuput in order to address supply and support prices.

In corporate news:

• The House voted to approve a $14 billion aid package for the automakers. But the Senate has yet to vote.
• AIG is planning to sell $15 billion in assets by year end (FT.com)
• Costco (COST) reported better-than-expected earnings, although revenues were a bit light
• PG will confirm its earnings outlook at its analyst meeting today
• Eli Lilly (LLY) reaffirmed its outlook for 2008, and raised guidance for 2009

Asian markets were mostly higher overnight; the dollar is lower today, helping push gold and commodities higher; the 10-year yield is lower to 2.64%; and the VIX is -1.6% lower to 54.83.

The market continues to hold up remarkably well. In recent months, if the market had rallied 9 out of 11 days, it would have then staged a huge correction. Also, the market recently became deeply overbought. Again, this probably would have led to a big plunge in short order. But for the last few days, the market has been consolidating its recent gains by moving sideways in quiet volume. This is textbook bullish action, and it looks like the next move will be higher from here.

The S&P 500 is hovering just below its overhead 50-day moving average. A move above this resistance level would be a nice bullish sign, and probably get more investors excited about the prospects of a further year-end rally.