The FOMC statement once again included language "the underlying (code for 'core' rate) rate of inflation is trending lower." This, of course, excludes just about everything important you use everyday--food and energy. In some places of the world there are food riots. Prices you're seeing at your supermarket are beginning to sky. The Fed announcement Wednesday continues the policy of completing the purchase (monetizing) of more Treasury debt. Immediately after the announcement commodities rallied sharply as the Fed is giving them the green light.

The other interesting rationale is that economic growth is too slow and won't generate jobs. Did QE1 produce jobs? Has QE2 generated jobs to date? No. U.S. companies may continue to create neat gadgets but they're all being assembled/built overseas. Nothing in this policy will change that stubborn fact.

Naturally, a continuance of this policy also green lights more POMO and higher asset prices overall and could build another bubble that Bernanke & Co were blind to last time.

As an owner of stocks and commodities you should be happy for now. But, the end result may not be pretty.

At the WSJ, Kelly Evans outlined well the Fed's dilemma in The Fed's Magic Show Appears to be Over (subscription required) as she states among other things: "History suggests any further easing probably would do too much for the stock market and asset prices, and too little for jobs."

At the ETF Digest we maintain some so-called Lazy Portfolios in addition to our more active models. In this environment, and until POMO ends and/or Bernanke & Co get eye surgery, the former will outperform the latter easily.

For a Fed Day volume was unusually light. The markets were ramped higher early and then camped until the non-decision. Breadth per the WSJ was quite positive.

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

It's pretty remarkable how willing the media and investors are to accept the BS the Fed is putting out. Just looking at commodity charts we know the truth -- inflation is on the rise.

Thursday is Jobless Claims again and most analysts are just taking the recent moving averages and tossing that number as their estimate. They actually get paid for doing this.

Durable Goods and Pending Home Sales (dominated by foreclosures most likely) will also be featured.

Earnings continue to rollout with most solidly beating expectations. The focus remains on those versus others which are ignored -- such is the mood.

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: VT, MGV, BND, BSV,  XLF, DJP, DBC, USL, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, TBF, IEV, ILF, EWA, EWC, EWJ, EWG, EWU, BWD, GXG, THD, AFK, BRAQ, CHIIQ, 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 .

 
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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