In the words of Steve Kroft of 60-Minutes, continued and irresponsible spending by the Federal Government, this time to buy an additional $1 Trillion in toxic assets from the banks gave the market enough reason to continue its impressive rally of late, despite the long-term inflationary impact such spending will create. It’s hard to get overly excited about this rally until we see how this market reacts to a pull-back and the eventual attempt by the bears to take this market lower. Just as stocks cannot continue a parabolic sell-off as we saw for the first two months of year, neither can the market do the same when rallying – and we are getting rather close to doing as much. So if we can eventually pullback and then see a strong rally, that will be one of the best signs that this market’s change in behavior is legit.

By the way, Wednesday’s market session will be a great test for our Obama-Short-The-Market Theory that we wrote about some time ago, where everytime the President gives a prime-time national address, the markets drop the following day. Given the rise we have seen in the markets of late this would be a great “sell-the-news” opportunity.

Here’s the Nasdaq and S&P charts…

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