The market ended off the highs of the session, but with volume coming in lower we avoid a day of stalling. Russell 2000 small cap index raced higher tying the NASDAQ composite for the top index of the day. Interestingly, enough both indexes have yet to have the golden cross yet continue to lead the entire market higher. Bernanke’s testimony on the hill helped spark some buying, but as the testimony wore on sellers began to take over. We continue to play in overbought conditions, but this rally is healthy and remains that way. Tomorrow’s job report will certainly set off fireworks.

Many average investors like to think that the performance of the STOCK market is closely tied to the underlying ECONOMY. And in most normal times, that’s true. But the current market environment is anything but normal.
I say that because we’re in the midst of yet another round of money-printing-driven action. The fingerprints are everywhere …
Super-low volume rallies in stocks. Levitation in gold.

The big talk of the town was FB filing for its IPO. Despite the news of the IPO sellers hit the market late day pushing stocks from its highs. Over at the NASDAQ despite sellers on the NYSE the NASDAQ appeared to be somewhat immune. Volume soared on the NASDAQ as institutions pile back into technology stocks. It is clear the leading index of this rally is the NASDAQ and we view this as a positive sign. A solid day for the NASDAQ while it appears the NYSE related indexes continue to lag.

Remember the reason for QE2... that whole "wealth effect" thing?  Well the problem with temporary manipulation of asset prices is just that... it's temporary.  Blow $600B through the hole, and while it creates temporary "happy happy time" (for a narrowing portion of our society) [Nov 10, 2010: Who Will Any Form of Intermediate Wealth Effect Really Help? Not the Masses], eventually market forces come back.  As The Bernank would say ... it's transitory.

Yesterday's tight action gave way to broader gains on higher volume. Tech and Small Cap indices enjoyed the best of the gains, helped by a very strong gain for the semiconductor index.

Gains in the Russell 2000 helped push supporting technicals back into firm overbought territory. Russell 2000 gains were enough to swing relative strength back Small Caps, although the long term relationship is in flux.