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The Banksters: Dave's Daily

There's a lot of nonsense and misleading information floating about regarding financial reform.
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There's a lot of nonsense and misleading information floating about regarding financial reform or finregs. Yes, all the things the headlines feature are in the bill, but in name only since they've watered down substantially. If not, why is the leading sector in markets today

KBE

(KBW Bank Index ETF)? Just because the uncertainty is removed? Hardly. Sure, for the banksters they can go about their business with little concern. Hell, Chris Dodd will probably be on the board on Citigroup in short order.

The Volcker Rule in its purest form requires banks and brokers to be separated. In a milder form, it restricts proprietary trading with the public's funds. Since the FDIC guarantees deposits this means Uncle Sugar has been there to back-up stupid mistakes--that pesky Moral Hazard thing. In the current form negotiated by Barney and Chris there are just some restrictions on trading. Chris, using his best Pelosi description stated: "No one will know until this is actually in place how it works!" This is thoughtful leadership at its best! I could go on but the folks at Zero Hedge have things well described

HERE

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Markets limped along with gains in bank stocks and commodity markets including precious metals, base metals and energy as the dollar weakened.

Once again volume on a slight up day was light while breadth positive.

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The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

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The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

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The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Major U.S. Markets

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SPY:

So, what held markets together was the lift from financials and energy while other subsectors languished.

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MDY & IWM:

These two sectors were able to recoup some of the sizable losses incurred throughout the week on Friday. Support held and if these sectors are the most economically sensitive they got little help Friday from GDP data.

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QQQQ:

I'm still waiting to hear from the NASDAQ why they've let Apple become 20% of the NDX which is the index to which the QQQQs are linked. Taken together, INTC, MSFT, QCOM, GOOG and ORCL don't equal Apple's weighting. This makes the QQQQs highly misleading to would-be investors in "tech".

Continue to U.S. Market Sectors, Selected Stocks & Bonds

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XLF:

As Shahiern Nasiripour writes today for the Huffington Post

: "

Many of the measures that offered the greatest chances to fundamentally reshape how the Street conducts business have been struck out, weakened, or rendered irrelevant." I would have to agree even though not a HuffPo fan. This is why bank stocks rallied Friday as they escaped with what they wanted so it's business as usual.

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XLI:

No congressional help here although the dollar was down helping exports.

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XLV:

A defensive sector, the government is not helpful to drugs and healthcare providers--just the opposite.

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XLB:

Materials should've done better given the rise in many commodity markets.

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XLY:

We love Chucky and wonder if the little devil is out there shopping like mad. Mr. Market doesn't think so presently.

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IYR & XHB:

Deals can't get done and even refi's are difficult within REIT sector as banks are tight with commercial lending as they must build their reserves. Homebuilders? Well, the bad news just keeps coming. I believe Lennar posted poor results Friday.

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IYT:

Not a good sign for the economy if "stuff" isn't moving around.

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XLU

: Don't be dazzled by the banksters, it's what's going on in sectors like this that tell the tale for economic and earnings growth.

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IVE

: Value/Smalue it makes little difference for it's down into the bowels of markets where the real "tell" is.

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IEF, TLT & TIP:

The 10 year represents mortgage money and therefore is closely watched. The 30 year is only yielding 4% and if you want to tie your money up for that long at that yield you must be a life insurance company. TIPs are flipping-off government inflation chatter and data.

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LQD, HYG, MUB & BWX:

LQD is rising since supply is being overwhelmed by the flow of funds from retail seeking safe havens away from the machines. HYG may be turning a little as again investors seeking safety. MUB is about taxes on the one hand which will be increasing making them more appealing but, on the other hand, are the troubles these states, cities and towns are in.

Continue to Currency & Commodity Markets

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$USD/DXY & FXE:

It isn't usual to feature a cup & handle formation on "weekly" charts but there it is with Uncle Buck. Let's see how it works out.

TheStreet Recommends

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GLD:

It wasn't smooth sailing this week for gold since with options expiration at hand Friday anything could've happened. But with the dollar weaker and commodities strong, back higher we went.

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DBC:

The commodity tracking fund remains mired in a trading range.

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$WTIC/CRUDE OIL & UNG:

Crude oil rises with a dollar decline of sorts but also on summer driving picking up. UNG is base-building.

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FCG & XLE:

Both of these markets look terrible technically.

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DBB:

The only explanation here is a declining dollar and increased demand from Asia.

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DBA:

Ag commodities aren't moving much although "softs" (sugar, coffee and cocoa) continue to climb.

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MOO:

I guess nobody will need tractors, seeds or fertilizer in the near future.

Continue to Overseas & Emerging Markets

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EFA:

Despite a modest rally in the euro and an okay week overseas, EFA couldn't get it together.

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EEM:

With a rise in commodities EM's held fast to unchanged levels by week's end.

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EWJ:

The yen is very strong lately and that's not welcome in Japan. However, the market is not pleased with conditions overall either.

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EWY:

Free trade agreements need to get done and until then, Korea will remain a rigged market in favor of them.

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EWA:

Australia is stuck in a trading range "perhaps" but is supported well by a new prime minister who is more accommodative to miners. The country is endowed with vast natural resources for export north to the greater China area.

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EWC:

Canada isn't doing the financial reform shtick--it doesn't need to.

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EWM

: Malaysia is loaded with natural resources including palm oil and rubber much needed in China.

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EWZ:

Unchanged on the week is a victory for any market.

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RSX:

Loaded with natural resources and the rally Friday helped lift it off support.

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EPI:

If any market is off in its own world its India. It's showing as much strength as any market in the world.

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FXI:

So, China and India are doing just fine it seems. China stocks have been weak of late but FXI seems to have cherry picked the better areas since most stocks beneath the top 25 are in a bear market.

Continue to Concluding Remarks

It wasn't a great week by any measure. Banks were able to escape from the congress with only superficial injuries while politicians will spin-it as they just reinvented the wheel. I've been a long-term fan of conditions as they existed before the Glass-Steagall Act was repealed in 1999. This Depression Era act prohibited (among other things) the combination of banks and brokers we see today. Then we had many large brokerage firms doing their business which included investing client funds and trading for their own account. This was fine and well-controlled by the SEC. Then a bipartisan team led by Phil Gramm and Robert Rubin (with Sandy Weill calling the shots from behind the scenes) got the act repealed allowing at the time Citi Bank to merge with Travelers/Smith Barney. This put the fox in the hen house which has led to many of the financial problems we currently face. It's difficult to put the toothpaste back in the tube certainly, but what passed for financial reform Friday was a gift to the banks and cruel joke to the public.

That's over now until the next bad episode. Now we move on. Next week begins the start of the summer doldrums and light volume as another holiday week unfolds.

Have a great weekend!

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Disclaimer: Among other issues the ETF Digest maintains positions in: TIP, GLD and DGP.

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. More detailed information, including actionable alerts, are available to subscribers at

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Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.