Now, who knew?!? Bernanke, speaking to an FDIC crowd stated, "Our policies (QE2) have contributed to a stronger stock market just as they did in March 2009 when we did the first iteration of this program." Okay, many have suspected this to be the case and now he confirms it just in case you couldn't connect the dots yourself.

The admonition "don't fight the Fed" has taken on an entire new level of import. So, all you short sellers who think you can fade QE2, you'd better think twice (another $8.4 billion POMO today.)

Other comments from Bernanke caused a late sell-off in gold as his comments were interpreted as bearish.

Stocks fell slightly Thursday on poor Jobless Claims data (actually bullish since QE2 should continue) and some negative drug trial results for Merck.

Materials, a previous leader, sank on declining metals prices for companies like Alcoa and Freeport McMoran. No matter, investors are quickly turning their attention to Intel's earnings which (gasp!) beat expectations; but, there was an extra week of sales in the numbers.

But overall markets are unfazed as the Fed theme is deeply ingrained in the minds of the few playing the game.

Volume remains light and breadth was flat to negative Thursday per the WSJ.

Continue to U.S. Sectors, Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas Markets & ETFs

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.

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.

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

We did have a correction beginning in early November but it was shallow and short-lived. Bernanke is taking full credit for the stock market rally since he knows exactly what the Primary Dealers will do with the free money injections they're given--stock prices will rise surely as B follows A. But all this money flowing to Wall Street and investors' 401Ks has a narrow benefit that hasn't helped on the jobs front. Investors are still redeeming mutual fund investments so retail enthusiasm is difficult to ascertain. At the same time the American Association of Individual Investors (AAII) internal data reflects member bullishness at record highs.

The VIX readings reflect high levels of complacency among investors. RSI's on daily/weekly charts are at much overbought levels and DeMark readings indicate investors should expect a reaction. But, we may be living in a different era as the Fed in the engine driving growth period. Fighting their power is a waste of time and money and light volume enhances the bullish impact.

Let's see what happens. You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook.

 

Disclaimer: Among other issues the ETF Digest maintains positions in: TBF, UUP, DBA, DBB, EFA, EEM, EWA, EWC, EWJ & FXI.

 

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 .

 
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.

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