Ben Will Do Whatever Works: Dave's Daily

The Fed wants higher stock prices. Bernanke has said as much.
By Dave Fry ,

BEN WILL DO WHATEVER WORKS

The Fed wants higher stock prices. Bernanke has said as much. In today's

POMO

action the Fed bought what the Treasury just auctioned a month ago. "Left hand, right hand", call it what you will. The Fed has now accumulated over a trillion in Treasury bonds and there's more to go. If you want to fight that money printing, good luck to you.

The story is quite simple, the Primary Dealers are well-lubed with Fed cash and they know what they're supposed to do with it....buy, buy, buy.

Yes, we've been missing the past few days, but hell, I had to let a few days pass so volume could build to what might pass for one normal day. You might well wonder why the market is even open? Well, silly, it's so things can get propped and year-end bonuses paid. Let's remember who Ben works for ultimately. Sure, color me cynical.

While our leaders are asleep at the wheel pondering fresh partisan talking points and other nonsense like

pardoning Billy the Kid

, China corners the market on rare earths.

Market behavior on Wednesday remained a little weird with efforts to push prices higher met by selling in the end.

Volume? Embarrassingly low while breadth was somewhat positive.

Continue to U.S. Sectors, Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas Markets & ETFs

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.

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.

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 Concluding Remarks

I may do another post Thursday dependent on conditions. We have our own affairs to attend to as the year closes and prepare our portfolios for 2011. The market remains open theoretically to accommodate those that "need" to trade which is understandable. Current markets are a Fed/Primary Dealer affair and it's all too obvious.

As a trend-follower we wouldn't be short no matter our emotions.

The first week of January will offer fresh fund flows for reinvestment, portfolio reallocations and a lot of economic data to ponder. It isn't unusual for markets to reverse as portfolio managers have the entire year to make back losses should they occur. Further, the so-called "January Barometer" (as goes January, so goes the year) will be discussed even to the first week also being important. This year January was negative but the market finished higher despite a very rough twelve months.

Let's see what happens. You can follow our pithy comments on

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Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, XLB, XLI, XLF, IAU, DBC, DBB, JJC, XME, USL, FCG, DBA, EFA, VWO, EWJ, EWA, EWC, TUR & 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

.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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.

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