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Volume still matters and we're still not seeing it with only 168M shares of SPY trading today. That said, bears were nowhere to be found, and like we pointed out Friday, we might have a September 2007 replay when stocks climbed a wall of worry before imploding.

According to

Zero Hedge

112 stocks accounted for half the day's trading volume. This type of activity is being driven by indexing and HFTs.

Monday started with a gap higher following better economic data from China and an EU decision to allow banks to keep their crud under the carpet until 2019. Now, that's what you call kicking the can way down the road! But it buys time now doesn't it?

Also, we had another round of

POMO

($3.4 Billion Permanent Open Market Operations) which is why bonds rallied some with stocks today because Uncle Sugar was a buyer. Talk about a Ponzi Scheme.

There is plenty of M&A activity combined with some financial engineering (stock buybacks and so forth) to enliven traders especially with the NASDAQ. Then the word going around the street is an impending GOP victory which many believe favors the bulls.

We just weren't ourselves today since making two trips to the airport today with the second occasioned by a misplaced cell phone. Let's see, an hour each way chewed-up four hours of time so this post will be short.

Again, volume was light overall while breadth is positive pushing markets into short-term overbought conditions.

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SPY

: The large caps remain the primary focus of manipulation and trading interest for the HFTs and hedge funds.

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MDY & IWM

: As I've said a gazillion times, H&S patterns aren't my thing and even if they were, they're never 100% reliable--few indicators are. Curiously, the neckline is close to the resistance areas drawn over the past few months.

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QQQQ & AAPL

: Is it a mere coincidence they're both up nearly the identical percent? Too funny!

Continue to U.S. Sectors, Stocks & Bonds

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FDN & GOOG

: The internet sector is doing quite well away from other sectors like semis which too were up on the day.

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SMH & INTC

: Semis were oversold and got squeezed. Never short a quiet market comes to mind.

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IGV & MSFT

: With Microsoft, I smell one of those special dividends in the works.

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XLF, C, JPM  & BAC

: Financials have authorities working overtime protecting their interests with POMO and nefarious accounting gimmicks both here and abroad. But, it is what it is.

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IEF & TLT

: It really is a unique time and sometimes I think Bernie Madoff is running the Fed's open market operations.

Continue to Currency & Commodity Markets

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$USD/DXY

: Uncle Buck may be just waving bye-bye.

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FXE & FXY

: Soon Japanese investors will be back in Waikiki, NYC and Beverly Hills scooping up properties again.

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GLD & SLV

: As far as gold is concerned, even though the Fed is printing money and debasing the currency, investors want more risk and they'll get back to gold later.

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DBC

: Heavy weighting in energy keeps the rally alive in the trading range.

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$WTIC & XLE

: Oil remains in a trading range but higher with a declining dollar. Energy shares still remain a slopfest.

Continue to Overseas Markets & ETFs

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EFA

: Investors like a good cover-up and Basel III gave them all they could want for the next decade.

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EEM

: Higher betas (volatility) mean more upside for commodity laden EMs.

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FXI & HAO

: China's growth continues apace despite worries of a slowdown.

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EPI

: The India Sensex set fresh highs--no more need be said.

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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

Do you like the European cover-up? I thought not. How about the tango between the Treasury and Fed?

Volume still remains light by even recent standards. With 18 straight weeks of equity mutual fund withdrawals and the loss of proprietary trading desks there is less support for markets. But, enter the HFTs operated by trading firms and hedge funds and they'll drive prices as their HAL 9000s dictate. 

I have to wrap it up and promise more coverage tomorrow.

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: FDN, IGV, GLD, DGP, SLV, AGQ, EPI and HAO.

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.