Fed Inflates Stock Bubble: Dave's Daily

The Fed further inflated the stock market bubble by stating in its minutes that it will keep rates low.
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Dave's Daily

By Dave Fry, founder and publisher of

ETF Digest

and author of the best-selling book

Create Your Own ETF Hedge Fund.

April 6, 2010

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FED STATES THE OBVIOUS

The Fed minutes revealed the stunning conclusion interest rates will stay low for an extended period if the economic outlook worsens or inflation drops. Wow, that's surprising logic! With those mighty words stocks picked up steam some and closed higher overall. Not mentioned by many mainstream media talking heads is the building stock market bubble which, of course, few would care to see or discuss. It's what the Fed does--making bubbles. I see little difference this time but we'll go with it for now.

There was little else in the way of news to motivate traders in either direction. 

Volume was pathetically light running nearly half the past three month average.  Breadth was again positive.

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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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Per Investopedia:  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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Per Investopedia: 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 Major U.S. Markets

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Continue to Market Sectors, Leveraged ETFs & Bonds

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Continue to Currency & Commodity Markets

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Continue to Overseas & Emerging Markets

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Continue to Concluding Remarks

This is a lot of charts for another quiet and unremarkable day but that's what we do.

Its remarkable how little volume is being generated and spring breaks must be on extension for traders.  Wednesday will feature little more in the way of economic data with only Consumer Credit and Crude Inventories on tap.

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: RSP, MDY, IWM, QQQQ, XLB, UYM, XLF, KRE, KBE, IYR, XLY, TBT, TBF, UUP, AGQ, DYY, UCO, XLE, DIG, BDD, DBB, EFA, DZK, EEM, EDC, EWY, EWJ, RSX, 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

.

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.