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Markets rally in response to Frank's criticism of derivatives amendment

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Jason Reed/Reuters

(Read caption) U.S. Rep. Barney Frank speaks to the press outside the West Wing of the White House in Washington on May 21 following their private meeting with U.S. President Barack Obama. Frank's criticism of Blanch Lincoln's anti-derivatives amendment gave the market a shot in the arm Wednesday morning.

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Sometimes the proximate causes for a rally are irrelevant or too murky to discern, but sometimes they are right in your face. This morning, the Dow spent most of its time down between 200 and 300 points. Carter Worth pointed out the technical significance of where the S&P was sitting as well.

Bearish sentiment was everywhere, even James Cramer was talking about his new downside target under a worse-case scenario for the Dow (8200 or something).

And then Barney Frank started talking about the financial reform bill and the fact that Blanche Lincoln's uber-harsh derivatives legislation was too much and would probably not see the light of day (as I told you it wouldn't here). Goldman Sachs ($GS) immediately reacted to this development by bouncing from a new 52 week low at 134.20 to going green.

GS is now up $6 and the markets are approaching the flatline into the close.

Does a lack of derivatives regulation offer a fix to anything other than the job security of a handful of Wall Street managing directors? Not really. But the GS leadership was good enough to stem the selling - for now.

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