The market can certainly rally on this housing plan but after people realize what this plan is about then I'd expect that rally to peter out. The plan basically says if you were irresponsible as a buyer then we've got your back. If you were responsible then they need you to donate your money for the good of the country.
Other possible rally inducing events. TALF provides non-recourse (and unconstitutional) loans to hedge funds to lever up and buy toxic assets. This rally will peter out once people the price paid for these assets were still too high and the losses incurred on these will be monetized by the Fed.
