Bernanke's Unconventional Measures: Dave's Daily

"This is where we fight," was a good theme marking Thursday's close. Friday's rally made waiting out the week right.
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If you've followed these posts for some time you'll know when using weekly charts to wait the week out. This is something we've discussed repeatedly as technical support/resistance levels are challenged or defeated.

"This is where we fight," was a good theme marking Thursday's close. Friday's rally made waiting out the week right. Markets had threatened well defined support lines all week. Friday markets rallied as crummy GDP data was better than feared and Bernanke threw down the nuclear option regarding massive QE2. In fact, he said the Fed will do anything including using "unconventional measures" to prop the economy and markets. This puts bears on notice that helicopters from Kinko's 33 Liberty St are preparing a money drop. Further, if there is a PPT (Plunge Protection Team) intervening in markets perhaps this is an unconventional measure being deployed. Conspiracy theorists would think so.

Even a terrible note from Intel that they will miss the next quarter's estimates didn't harm markets or Intel's price for that matter. This was how anxious bulls were to get things going their way again.

Nevertheless, most markets still closed lower on the week but the "stick save" at support was in.

Volume was near recent averages and it appears from current data breadth was 90/10 positive.

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SPY

: Still in the trading range and still a negative week. The "stick save" was put in place where it needed to be. Now we move from Fed jawboning to the real deal if any.

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MDY & IWM

: A meat grinder of a trading range and an epic battle at support.

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QQQQ & AAPL

: In the end we just end up down on the week.

Continue to U.S. Sectors, Stocks & Bonds

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INTC & SMH

: "Stick Saves" wherever you look on weekly charts. And, no, I haven't touched the lines from previously.

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DELL & HPQ

: Making fools of themselves over a company now being priced at 600 times earnings or some such astronomical number.

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XRT, PCLN & EXPE

: When you think of retail is Priceline or Expedia the first two companies you'd consider? The index linked to XRT puts them at the top of the weightings which is strange but is supportive to the index obviously.

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IYT:

They jumped on it Friday to lift it to previously noted resistance.

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IYR

: In the flow on Friday with buy programs.

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IEF, TLT, TIP & LQD

: If the Fed starts buying Treasurys shouldn't that be supportive to prices? The Chinese will be happy to sell them some.

Continue to Currency & Commodity Markets

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$USD/DXY, FXE & FXY

: Currency markets are in flux. QE2 should be the end game for Uncle Buck if it's substantial.

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GLD & SLV

: Silver looks like it wants to break-out and run. For QE2 to be successful the Fed must find a way to suppress these prices.

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DBC

: Commodity prices overall are rising due to fears QE2 will put pressure on the dollar which boost commodity prices.

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$WTIC, XLE, FCG & LIT:

There are plenty of fears that QE2 will drive energy prices (priced in dollars) to greater heights as the dollar is taken lower.

LIT

(GlobalX Lithium ETF) sponsors were at the NYSE to ring the bell today and we joined them for the event. Fun stuff!

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DBB

: Base metals are moving higher also stimulated by QE2 opportunities.

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Continue to Overseas Markets & ETFs

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EFA

: Just another pretty face.

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EEM

: A recovery bounce with all other markets Friday.

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EWJ

: Japanese stocks are just churning about and intervention with the yen looms which may hurt U.S. investors.

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EWA

: If the world is flush with cash as so many say then they'll put it anywhere not that the land down under is a bad place mind you.

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EWC

: Canada and Australia are both Commonwealth countries, commodity oriented and brothers in trend.

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EWY

: South Korea not in favor this week.

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EWZ

: Brazil shares suffered most of the week with bouts of heavy selling as commodity prices were weak until Friday. Further the country is plagued by weather issues affecting crops which they're heavily dependent on for biofuels particularly sugar.

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RSX

: Russian markets rally with perceived risks from a falling dollar.

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EPI

: Not as oversold and lacking interest from investors amped-up buying U.S. issues which were more oversold.

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FXI:

China shares just remain "stuck" in this trading range and have been for the last year plus.

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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.

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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.

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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

"Unconventional measures" means the Fed will play from an open book. Will they intercede in stocks? There's nothing to prevent that but most pundits believe the Fed will be buying up Treasurys. If that's the case why the special language as the same pundits love to parse his words.

By the end of the day Friday we still closed lower on the week. But the 90/10 breadth reading was impressive as was volume on a late day in August.

You know something, next week offers more interesting opportunities and data. Friday will lead with the unemployment report and then a long weekend to contemplate it. They never said it would be easy.

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: GLD, TIP, LQD, TZA, SMN, RETS and EPI.

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

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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.