Various forms of quantitative easing (QE) from central banks, and views that Europe’s debt problems will be bandaged with QE have pushed the markets higher on low, uncommitted volume, what we would call a "QE index melt-up." Continued low volume upside movement creates a "wedging" look to the charts of the major market indexes, where a "wedge" is defined as a rally in an index or an individual stock that occurs on successively weaker volume. Norrmally, this indicates a drying up of buying demand, but in a QE environment has typified many short-term rallies in the major market indexes.

Fed officials remain in sharp disagreement over further QE courses of action, with Fed head Rosengren calling for a large, open-ended FOMC asset purchase that would consist of buying up both mortgage-backed securities and Treasuries. Meanwhile, Fed head Fisher claims it would be a mistake to launch a new QE campaign so close to the November election, and that the real problem plaguing the economy is the lack of action on fiscal policy in Washington. Which Fed head do you agree with? Ultimately, the final solution to the global debt crisis cannot be achieved through money-printing - eventually fiscal policy must take the driver's seat in any long-term solution, and QE responses by the ECB and the Fed can never be anything more than kicking the can down the road.

The market's rally is difficult to play on a stock-by-stock or ETF basis primarily because of the uneven, rotational action that lacks any real buying conviction. For example, big-stock market leader Apple (AAPL) cleared a technical breakout buy point at 619.87, the high in the handle of a "cup-with-handle" chart base formation, yester, but this breakout occurred on volume that was -24% below average daily volume and lower than the prior day's similarly light volume. While a leading stock such as AAPL can continue higher on weak volume just as the general markets can in a QE "melt-up," it is risky to buy into such a situation since weak or diminishing buying volume can be a harbinger of a reversal, and it's likely that more negative news out of Europe is probably just around the corner as has been the case for many months. Investors are likely better off keeping their powder dry in a late-summer melt-up that is entirely news-oriented and hence subject to more capricious action, both upward and downward.