Securities Research Services

Wednesday, August 13, 2008


While it seems most traders consider the weakness over the past two days to be merely just a light pullback in a near term uptrend, we see ominous clouds on the horizon.

US law is a funny thing. If you are just an average Joe you are held to a very strict standard and the rule of law is considered quite rigid. For example, commit a minor traffic violation and few are let off with a warning. Instead, heavy fines are meted out, points get put on the record and insurance rates rise.

Things work differently in the financial world though. If you are a member of society we like to refer to as big money, laws are more flexible and as often as not, violations are merely winked at.

In fact, there are instances where breaking the rule of law is openly not enforced.

After the financials were down too much for the government's sensibilities a couple of months back they announced emergency measures wherein they planned to actually enforce the rule of law already on the books and forced traders to cover their illegal naked shorts.

Today they lifted these emergency measures and low and behold, the financials were once again taken apart.

The logic in this measure is hard to find, but nonetheless the financials threaten to take apart the latest market rally, as does a potential ongoing bounce in oil.

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