Stock Rally Based On FASB Caving To Political Pressure

Is this rally based on good economic data; earnings news; the G-20; more regulation; higher taxes; more debt and bailouts? Hell no! This is about the FASB caving to political pressure to allow financial institutions to mark their toxic waste to a model fantasy. It’s plain for all to see so please put the BS aside.

Now, I’m just a technician (no doubt with an attitude) and my job is to follow the dictates of the tape as best as I see it. Therefore, we’re long but, like I said yesterday, holding our nose all the way.

Volume was substantially higher today and breadth was as positive as you would imagine.

Tomorrow (Friday) is the all important employment report. Will bulls care? They’ve blown-off just about every negative economic data point during this recent rally discarding what didn’t suit them and embracing what did.

The bulls have control of the tape and their cheerleaders own the BS. It’s pretty shameful that the FASB would cave-in but the political pressure was intense. It was generally common for financial institutions to carry mortgages at their maturity value. For many years with conventional mortgages this made sense. But toxic waste composed of worthless derivatives isn’t in the same category. This is like cancer being deliberately put in remission knowing it will resurface at a later date for a different set of politicians and taxpayers. It’s dishonest at best.

These comments aren’t sour grapes since the ETF Digest, as you’ve noticed, is involved in many long positions since that’s our job. Sometimes doing your job is distasteful even as it is rewarding.

Have a great weekend.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, IGM, FDN, XLF, XLI, XLY, GLD, DBB, DBC, USL, MOO, EFA, EEM, EWY and FXI.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.

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