Stocks, commodities and currencies rallied after the ECB's (European Central Bank) outgoing President Jean-Claude Trichet indicated the bank would restart bond buying and long-term financing operations in the euro zone. This is QE or Quantitative Easing euro-style. Traders remember how well this helped U.S. stocks one year ago so they climbed aboard the bullish train continuing the short-squeeze from late Tuesday.

The rally is clearly the HFT algos at work and only reviled when markets decline but little mentioned on rallies. Nevertheless these volatile program trades are causing many investors to flee markets as noted in this article. In fact, nearly $200 billion has been withdrawn from equity mutual funds since 2010 according to the ICI (Investment Company Institute).

Therefore markets now are currently the playground for HFTs and an assortment of large hedge funds utilizing these programs among others. Individual investors are either captive of various financial plans watching helplessly as stock markets flirt with the 3 rd bear market in 11 years--a feat not seen since the Great Depression.

But we're in rally mode just as we had tip-toed into bear market territory a few short days ago. Short interest was quite high going into Tuesday and markets were short-term oversold. The great spark that stampeded the herd came from a now refuted FT article. So it was lightning and thunder followed by no rain. Nevertheless the melt-up was underway now bolstered by European QE.

Apart from rumors from the EU and today's announcement from Trichet there has been little in the way of positive economic news. All readings Wednesday were basically unchanged from previous reports. Thursday offered jobless claims which were once again higher but spun "not as bad as feared" and some better results from retailers (XRT) which powered this sector higher.

Friday is the all-important employment report and expectations are for an increase to 65K jobs with a consensus range of 30K-115K. This should move markets one way or another.

Of course the big news from overnight was the tragic death of Apple's Steve Jobs who fought a long battle with pancreatic cancer which most knew would have this ultimate result. His ingenuity and skill will be missed.

Volume was moderate on the day but stocks soared into the close. Breadth was quite positive per the WSJ.

And, ETF Digest subscriber and pal David Hurwitz provides a more detailed summary below:

You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook.

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

Continue to Currency & Commodity Market ETFs

Continue to Overseas Sectors & 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

Friday is the unemployment report. The rally is primarily a short squeeze given stocks were oversold. The spark that got the herd and algos going was the "hope" that a European fix was in. It's not, at least not yet. The entire situation is dynamic but those in control of the tape are taking investors on a roller coaster ride.

Let's see what happens.

Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current positions if any are embedded within charts. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: SH, EUM, EFZ, SKF, EUO, VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, EWD, 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 .

 
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.