Bulls want to put the euro zone in the rearview mirror and change the focus on earnings and the calendar. Typically, the fall is when we do get the best opportunities to be long. The problems have been well publicized and now portfolio managers are in the mood and mode to make their year.

Friday's Retail Sales, only marginally better than expected at 1.1% vs .8% expected and .6% ex-autos vs .4% expected, got bulls fired up. On a day like Friday and with momentum building it's easy to ignore the poor Consumer Sentiment data (57.5 vs 60 expected and prior at 59.4) and higher import prices (.3% vs -.5% expected and prior -.2%). It might even be asserted higher import prices may account for a portion of higher Retail Sales data but let's not waste time on thoughtful details when the tape is on fire.

Google's (GOOG) earnings beat (they don't provide guidance so analysts just guess) from the previous evening combined with news Apple's (AAPL) report that 4 million new iPhones were sold got motivated bulls and tech. Further with tiny Slovakia back on board with the euro zone bailout everything looks just fine right? Sure Fitch and others are in a bank and country downgrade mode but they're always late anyway and just playing catch-up so the thinking goes.

So, let's get with the program all you "sheeple" since stocks are breaking out of their trading range. The sprint to 2012 is on and bulls are determined to make a splash with whatever assets they have left.

We're also revisiting the previous weak dollar, strong stock market theme that was much in play until euro zone issues were front and center. Gold and commodities rallied as reflation is now the better option for authorities. Meanwhile, whatever money is on the sidelines much of it is parked in bonds. With selling there, it's logical to conclude switching to stocks is occurring.  

Volume was quite light for this rally. Let's face it, so many investors have left the market there isn't much left to trade away from the prop desks, HFTs and hedge funds. But again, light volume was a signature of previous rally days prior to the June turnover. Breadth per the WSJ was quite positive and we're no doubt short-term overbought again.

ETF Digest subscriber and friend David Hurwitz provides us better breadth and volume detail as noted below:

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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

The NYMO is now overbought but this is a very short-term indicator. We saw the reading at 75 on Wednesday and it immediately dropped to 55 on Thursday. Now we're back at 80 meaning we could sell-off in a similar fashion next week. I've seen the NYMO at over 100 on several occasions. At the same time, the VIX has fallen below 30 and the McClellan Summation Index is now rising. Unless something untoward happens over the weekend we should expect things to continue higher with some profit-taking soon enough.

There's no question the HFTs have been active this past week and this shows no sign of abating.

Economic data will continue next week with Empire State Mfg Survey (Monday), Beige Book (Wednesday) and Jobless Claims and Philly Fed (Thursday).  Earnings will continue apace next week and IBM's report will be closely watched given how sharply the stock has rallied and its heavy weight in the DJIA.

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, UUP, 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.

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