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Don't Fight the Fed -- Yet: Dave's Daily

Investors today got what they wanted from the Fed with the message of more easy money policies and low interest rates.
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Today was especially interesting given the Fed news. First up was Janet Yellen's speech sending a tough jawboning message that low interest rates wouldn't last long and QE had its downside. That was tough talk and threw cold water on bulls' hopes for just the opposite. Then came the release of Fed minutes when the message was, we need more QE, the sooner the better, and prices need to rise--or, a little inflation never hurt anyone.

In these hyperactive times we suffer from short memories and perhaps this day's themes will quickly give way to earnings news, economic data and other events. It certainly seems that way.

After the close CSX reported earnings which beat estimates as did INTC. FAST reported earnings earlier which beat but provided a gloomy outlook.

Volume was abysmal before the Fed minutes release. Then, like a typical Fed day, volume spiked higher after the release, but even then was still on the light side. Breadth was mildly positive.

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Continue to U.S. Sectors, Stocks & Bonds

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TheStreet Recommends

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Continue to Currency & Commodity Markets

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Continue to Overseas Markets & ETFs

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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

I'll say it again: "Beware of the VIX below 20 and the Summation Index above 1000." This combination was last seen before, during and after the previous April top. It can last for awhile but then the inevitable correction will come so enjoy the ride for now but prepare for a disappointment.

Investors today got what they wanted from the Fed with the message of more easy money policies and low interest rates. The Yellen speech was quite comical since it's effect was to cool overoptimism from what she knew of the minutes.

Earnings season is upon us and perhaps those combined with economic data, more than chatter from on high, will drive markets. Then there's the election to contend with.

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, TNA, BGU, DIG, XLI, XLY, XLU, XLB, UYM, UDN, FXE, FXF, GLD, SLV, AGQ, DBC, DBB, BDD, JJC, DBA, JJG, MOO, EFA, DZK, EEM, EWJ, EWA, EWC, EWG, EWD, TUR, EZA, ILF, LBJ, EPI, FXI and XPP.

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

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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.