The Fed Feeds the Tape: Dave's Daily - TheStreet
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"So in the present circumstances, ZIRP and QE2 amount to a monetary Hail Mary.

There is no monetary tradition whatsoever that says the way back to U.S. economic

health and sustainable growth is through herding Grandma into junk bonds and

speculators into the Russell 2000."

David Stockman, April 13, 2011

Was there some really good news Friday to justify any rally? Oh, the CPI showed only "mild" inflation at the (wait for it) "core". The WSJ headline read: "Underlying Inflation Tame" which is hilarious! If you're human and consume food and energy the actual rate is running at 6%; but, since the government assumes you're not human, please ignore this. The Empire State Manufacturing data was quite positive but a closer look reveals the prices paid component was much higher, meaning inflation. Michigan Consumer Sentiment, more heavily weighted by stock prices, was slightly higher.

Earnings news both sucked and blowed as important companies like

Google

(GOOG) - Get Report

and

Bank of America

(BAC) - Get Report

disappointed.

As for BAC, how can they miss with all this free money and "mark to cost" toxic waste? Some reported that

General Electric

(GE) - Get Report

would report (wait for it) a "humble" quarter. That description even caused my keyboard to stink.

Despite this mishmash of data, Stockman's words bear remembering as the Fed launched another

POMO

action tossing in another $6.3 billion to the Primary

Gangsters

Dealers.

You might think the month of April young but today was options expiration, which added a little to volume and volatility particularly toward the close

And, if all this wasn't enough, gold and silver made fresh highs, which are clearly a show of no confidence or a hedge against irresponsible monetary policies. You're also supposed to ignore rising oil and agricultural markets Friday, which clearly aren't consumer friendly.

Volume was quite light until we hit options related expiration activity where the mechanical shenanigans become more evident. Breadth per the WSJ was quite positive.

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Continue to U.S. Sector, Stocks & Bond ETFs

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Continue to Currency & Commodity Market ETFs

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Continue to Overseas Sectors & 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

You must imagine me to be a bear. Well, emotionally and intuitively I am. But then we're trend followers and remain systematic irrespective of our feelings. Stockman has things right without question. This is an artificial market atop a Fed driven liquidity avalanche.

This liquidity finds its way to corporations who buy back shares and look to gobble up other companies. All this liquidity leads to a bubble in the IPO market as alpha-seeking trading desks and hedge funds are all over these deals. What will happen when the music stops in June? And, what if the band plays on??

There are negative cross currents in markets like XLE, XLB and XLF. Major markets can't rally far with these acting as a serious drag.

Not a winning week overall but you have to be struck by the low VIX level, which is remarkable given the intraweek volatility. Complacency is very high. It's a strange market.

Let's see what happens.

Disclaimer: The ETF Digest maintains active ETF trading portfolios. Further our Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, BWD, GXG, THD, AFK, BRAQ, CHIQ, TUR, & VNM

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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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.