Federal Reserve Chairman Ben Bernanke says that easy money is going to be with us for an extended period. That means low interest rates, so the rush is on again as Q2 money recirculates through the system chasing good and bad stocks alike. Is this a formula for higher prices or a red light flashing “irrational exuberance”?

The Nasdaq broke a three-and-a-half-year high on volume of just 580 million shares and breadth of 1.7-to-1 — not much confidence showing in those numbers. But by taking out the old high, the Nasdaq has very little resistance. The last time that it sold at 2,871 was in February 2001, and not many of those investors remain; thus, it looks like easy sailing for the Nasdaq.

The Fed’s lack of restraint also sent a signal that its goal is to encourage investors to take more risk. Result: The Russell 2000 index of small-cap stocks hit a new all-time high, crushing its 2007 high. And the Wall Street Journal reports that “some Russell components have seen their shares multiply by 50 times or more” this year.

Along with the new high in the low-quality stocks, the U.S. dollar fell again. And gold and silver responded by leaping to new highs.

Conclusion: The bull market has been confirmed by chart action and reaffirmed by the Fed. The long- and intermediate-term trends are up, and the short-term trend is on a steep, rising slope. This is typically the recipe for a quick run up followed by a sharp correction. Prices will no doubt go higher, but the atmosphere is getting light on oxygen, so traders should keep stops very tight.

With interest rates likely staying at ultra-low yields, what stocks will be in demand? I’ll cover that group of high-yielding stocks tomorrow.

For one stock to sell now, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.