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Sharply higher energy prices, the Yahoo (NASDAQ:YHOO)/Microsoft (NASDAQ:MSFT) merger collapse and rumors of trouble with the BoA (NYSE:BAC)/Countrywide (CFC) deal stopped bullish investors in their tracks Monday. But, bears were only able to do a little damage as volume and breadth were unremarkable.

There was plenty of news to digest yesterday but I think many investors are scratching their heads and looking over their shoulders not quite sure what to make of things. This accounts for the light volume and uninspiring breadth.

It seems a little strange that we’ve rallied as high as we have with the onslaught of negative news continuing. But, the powers that be have the microphone and the big stack to play with. Stocks aren’t cheap based on PEs but there’s a lot of cash on the sidelines looking for a home and rationalizing investments.

We’re in Boston now and spent Monday with State Street going over some of their products and ideas about the future. Today I do some interviews and then give a talk Wednesday before heading to Chicago.

Disclaimer: The ETF Digest maintains positions in: IYR, TLT, TBT, XLE and ILF.