Yesterday, the markets sold off noticeably on news that the Obama Administration has rejected both Chrysler’s and GM’s restructuring plans. They will have 30 days and 60 days respectively to submit a new plan in order to qualify for additional federal loans. President Obama is right in that taxpayers’ money cannot be used indefinitely to support the two ailing automakers. In particular with GM, they need to make drastic cuts to the number of brands and models offered, get more union concessions and renegotiate with debt holders. GM management needs to embrace the current reality and fast. They only have 2 months to do so. It is a forgone conclusion that Chrysler in its current form will be gone. Most analysts are skeptical that the 2 automakers can avoid bankruptcy.

As more questions mount about the viability of Chrysler and GM, Ford is looking good. It is only the one of the Big 3 that did not ask for government aid, avoiding the meddling that the other two are subject to. Before the financial crisis devastated auto sales, Ford had already made the necessary actions to build up its cash position to go through the tough times. Furthermore, Ford has in its pipeline products that are likely to resonate with their respective markets. Once the economy recovers, this auto company will be well positioned to generate profits. Trading in the high $2 range, F is within striking distance of the 200 day moving average around $3.20. Given the huge run up in the stock price, F will likely pull back towards the 50 day moving average at $2. F will probably trade between these 2 moving averages until there are more signs that the economy is stabilizing.

Google is cutting close to 200 jobs in its sales and marketing operations as the weak economy weighs on revenue growth. Even the company with the world’s most popular Internet search engine is not immune from the global recession. Longer term, the financial discipline demonstrated by the company will benefit them. They are not pursuing growth at any cost and are paying more attention to the bottom line. Closing at $353.29 yesterday, GOOG is well off its 52 week low of $247.30. Until there is more data showing that the economy has started bottoming, the stock will likely consolidate its recent gains. It could range trade between $300 and $375. If GOOG manages to hold above its 50 day moving average, around $330, the stock is well positioned to test the 200 day moving average at $400.

The stock markets rallied over 17% off its March lows. Furthermore, the latest economic data is suggesting that the economy could be stabilizing. New home sales and the durable goods numbers were better than expected. Businesses were aggressively slashing inventories to adjust to the lower level of demand. The upside for the economy is that current inventories might be too low. Companies might need to ramp up demand to meet client orders. This could be particularly true for the struggling auto industry. Current production is less than the projected 9 million annual vehicle sales. Investors will want to see when housing prices and job losses will finally stabilize. With so much cash on the sidelines, they are looking to put it to work.

Even with the news of the departure of two senior Merrill executives, BAC managed to hold on to most of its gains from Monday, losing only $0.58 yesterday to close at $7.22. With the announcement of the $1 trillion package to rid the banks of toxic assets, the wind is behind the beaten down banks. The troubled BAC is a leveraged play in the financial sector. After all, it underperformed when investors where dumping financial stocks and should do well in any recovery. BAC blasted through its 50 day moving average. If this stock can hold above this level, roughly $6, it could eventually test the 200 day moving average around $15.

Whether we are in a bear market rally or a start of a new bull market remains to be seen. For the S&P500 to have any legs to go higher, 800 needs to hold. It is also where the 50 day moving average lies. If this level is broken, the 52 week low of 772.31 will likely be revisited. Given the massive run up over the last 2 weeks, equities need to consolidate their gains. If the credit crisis shows signs of ebbing, the widely followed stock index will trade at a higher level. Looking at the charts, it could trade between the 50 day and 200 day moving average. From a fundamental viewpoint, investors want to see the economy stabilizing. This means smaller job losses, housing prices leveling off and the GDP contracting less.

The announcement by the Fed of a government plan to rid lenders of up to $1 trillion of troubled assets gave hope to investors that it will ultimately jump start bank lending and earnings.The plan will rely on private money to purchase these toxic assets guaranteed by the government. In pre-market trading, bank shares were up on the news. Compared to Citicorp and Bank of America, WFC is one of  the better managed banks.The stock is currently edging near its 50 day moving average, around $16. For the stock to go higher, it needs to break this level and trade above it. If it is successful in doing so, the next target is the $26 area, where the 200 day moving average is. If the 50 day moving average cannot be broken, WFC can retest its 52 week low of $7.80.

This health care products company has been generating steady operating results despite the challenging economic conditions. JNJ operates in different segments of the health care industry, ranging from consumer goods, medical equipment to drugs. Unlike some of its rivals, JNJ has some promising drugs in its pipeline. Currently at the $51 range, it is not far off from its 52 week low of S46.25. Resistance for the stock is around $55, also where the 50 day moving average is. If this level cannot be broken, JNJ stock will likely trade in a range. It will build a base providing that the economy does not further weaken. The fundamentals remain sound. This is a stock to buy on weakness.

For those who believe in Dow Jones Theory, one needs to follow the Dow Jones Transportation Index to see which direction that the overall equity markets will take.The theory is that activity in the transport sector provides a look on how the overall economy is performing. At yesterday’s close, the index is at 2632.48. Major resistance is around 3,000. The 50 day moving average is near the 2900 level. If the index fails to break and hold above these levels, the bullish case cannot be established. Given the extensive damage done to the overall equity markets, the sector could be basing out, range trading between the 52 week low of 2121.99 and 3000.

Given the uproar over bonuses at AIG, other major financial institutions that received capital from the Federal government are reviewing their own programs. The current mantra is why should executives be awarded performance money if their employer is struggling to stay solvent. Without the lure of big money, Wall Street firms’ ability to attract the best and the brightest are greatly diminished. Why work grueling hours and endure plenty of stress for modest pay? The Golden Age of finance is likely over. The remaining financial institutions will fall back on more traditional and less risky business such as straight out lending. Exotic derivatives are out. Instead of going to Wall Street, the math whiz will be working on developing clean energy.