Oddly, its Republicans offering a plan to raise taxes but on those with incomes over $1M (vs the WH $400K) and currently does not include spending cuts. The WH immediately stated it would veto this. The bottom line, this is a symbolic gesture since the Senate won’t even vote on it according to Harry Reid. The Republican ploy is to say they’ve voted to raise taxes on the rich. Then they would allow the country to go over the cliff after transmitting this vote and forcing the WH to “own” the damage. That must be their thinking. It’s a gamble obviously but Boehner’s base has shown no support for WH plans or to roll over and violate all their principles.

This left bulls somewhat shaken as stocks fell sharply after the GOP announcement but there are more rounds left in this stand-off. Stocks were overbought recently and a little rest was in order. In other words, Bulls had taken it as a given the cliff would be avoided. It still may be. We’ll just have to live with the volatility until a deal is done or not.

Housing Starts fell 3% but Building Permits rose 3.6%. The former data point is the more meaningful since some permits will never evolve into a “start”.

GM decided to buy back the shares the government owned at $27.50 yielding taxpayers a nearly 50% loss. Like it or not, that’s the math.

Bank of America (BAC) has $64 billion of mortgage delinquencies great than 6 months on their books—nearly half of their market cap. This is some of the looking under the hood investors aren’t spending time on. Those that do like Buffett must believe the Fed will monetize and/or backstop these loans.

The bullish case is quite simple: QEternity is flooding markets with liquidity that has few choices for returns beyond stocks.

The bearish case is more complex: Global economic data shows a contraction in GDP, commodity demand, earnings and evenues.

The dollar (UUP) was weaker as was gold (GLD). Commodities (DBC) were slightly weaker. Bonds (TLT) were stronger.

Volume was somewhat lighter than on Tuesday’s good rally. Breadth per the WSJ was mixed to negative.

Follow us on Twitter and join the conversation on Facebook

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, UDN, GLD, DBC, DBB, DBA, USL, EFA, EEM, EWZ 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. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.