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Dave’s Daily

MARKET COMMENT

Dave Fry at ETF Digest, March 17, 2009

The lady politician doth protest too much, methinks.
William Shakespeare (Hamlet)

A populist smokescreen is afoot. The bonuses to AIG executives have these watchful pols indignant. Cynically it’s an amusing display to cover-up their own ineptitude since you see they approved the deal from the get-go—bonuses and all. I guess they only read polls but not bailout legislation. So, it’s come back to bite them in the ass and the idiots have let loose with their phony fury. Give us a break!

Well, you probably don’t care about all this puffery and just want to get to the action. Your wish is my command.

Now it wouldn’t be right for the markets on St. Patrick’s Day to be anything but green. We got a surprising note on housing which markets liked a lot evidently. But, behind the scenes is this story circulating in American Banker that the FASB will soon cave of mark to market accounting for toxic waste. The entire article is for subscribers and the link is HERE if you wish to retrieve it. The comments below are from the introduction but you get the idea.
 

FASB Bows: Fair Value to Get Overhaul

American Banker | Tuesday, March 17, 2009

By Steven Sloan and Cheyenne Hopkins

WASHINGTON — Just days after Congress echoed the industry’s criticisms, the Financial Accounting Standards Board moved Monday to ease rules that have resulted in massive writedowns.

The proposals, to be released today for 15 days of public comment, are designed to reduce the scale of other-than-temporary impairment charges and help institutions comply with mark-to-market accounting rules for illiquid assets.

"This is a clear victory for the industry," since the FASB is "trying to give people the flexibility to have a higher value if that’s what they believe," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick PC. "It’s a new chapter."

The proposals could close the door on an ugly period for financial institutions.” (Dave….more like “close the door on the truth”.)

Meanwhile, back at the ranch, the bad news from Alcoa (lowered dividend and secondary stock offering) couldn’t contain bulls focused on good news and happy talk.

Share volume remains below average for most indexes while breadth was exceptionally good but not a 90/10 day across the board.

 

I’ve been posting DeMark monthly sequential 9s for two months now ever since an 8 was achieved. The oft-stated reason was that on long-term charts such as this a “perfected” 9 count often indicates “trend exhaustion”. Below is the S&P 500 ETF from that view but it is hardly the only index with that condition. Many others, especially major indexes, have this look. For us it means to stand aside and see if in fact markets now reverse (as seems possible now) or move sideways (my preferable way forward). If it’s the latter, then short positions can be taken once again with greater confidence.

Tomorrow we get the Fed and that’s also setting up triple witching for the end of the week. While the Fed should probably stand pat don’t be surprised by more “happy talk” from the wording in the statement. This is the most manipulative monetary authority ever, perhaps even exceeding Greenspan’s term. Bernanke’s got a lot riding on his research that he can achieve magic at avoiding a more serious economic downturn.

I have to say, I’m not finding volume that impressive. It’s most likely because the only buyers are a few remaining hedge funds, trading desks (armed with taxpayer money) and some switching from bonds to stocks. Other than that where’s the fuel?

Sure, I’m more than a little steamed about the false offense politicians are taking to the AIG bonus story. Where were they when they were doling out $100 billion to their pals on Wall Street? What grandstanding BS!

We’ll see what happens tomorrow after the Fed announcement. Another Big Wednesday?

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, TBT, GLD, USL and DBB.

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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