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Wall Street posted its third consecutive week of gains with the S&P 500 now up 6.8 percent for the year and more than 20 percent in just six months.

"I've never seen a market like this," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, a market watcher for 35 years.

"I'm showing, by every technical and quantitative standard I have, this market is at extreme levels. But no matter where we start out in the morning, buyers come in."

The trend of stocks starting off lower in the morning session but ending higher by the afternoon has been ongoing for weeks as investors view the small dips as reasons to buy.

But there is a perceptible level of anxiety in the market. Trading volume has been exceptionally low recently and the CBOE Volatility Index .VIX, Wall Street's so-called fear gauge, is up on the week despite the gains in stocks.

The index is usually inversely correlated to the S&P 500, and a rise in the VIX typically means a drop in the stock market.

The VIX, which ended at 16.43, up 4.7 percent on the week, is still historically low but substantially higher than in recent months. That suggests investors see more share gyrations ahead.

The driving force behind the rally is the money that poured into riskier assets like stocks in the last quarter of 2010 after the U.S. Federal Reserve pledged to keep interest rates low.

"With so much momentum in the market, we are likely to see some sideways consolidation next week but nothing more than that," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

LOW VOLUME=SIGNS OF FATIGUE

About 7.13 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq on Friday, below last year's estimated daily average of 8.47 billion.

Stocks have been struggling to match last year's trading levels, hovering in the 7 billion range this week. On Thursday, the volume was the second-lowest of the year at 6.7 billion shares, and Monday's session was the lowest of the year with a mere 6.6 billion shares.

"This is a sign that the market is tired, and unless we see an uptick in this volume," the level of investor anxiety will not retreat, Detrick said.

U.S. markets are closed on Monday for the Presidents Day holiday.

Speaking ahead of a diplomatic summit in Paris that will include many critics of the Fed's aggressive bond buying program, Bernanke acknowledged that strong capital flows from advanced economies to emerging markets may be having negative spillover effects.

"Capital flows are once again posing some notable challenges for international macroeconomic and financial stability," he said in remarks prepared for delivery to a Banque de France event in Paris before meetings of the finance ministers and central bankers of the Group of 20 leading economies.

However, he said that although policy-makers in the emerging markets clearly face challenges, such concerns should be put into perspective.

Bernanke's own unorthodox $600 billion bond buying initiative launched in November has stirred harsh criticism from countries around the world, and he has used international venues to defend it before.

U.S. quantitative easing measures have been attacked for driving down the value of the dollar, hurting emerging economy exports and inflating asset bubbles, and the Fed chairman can expect to hear about it from his counterparts at the summit.

Bernanke did not mention inflation concerns directly except to say that strong demand in emerging markets is contributing to global commodity price increases, something which affects the most advanced economies as well.

Gradually smoothing global imbalances of trade and investment is a top priority for G20 officials. Officials have set themselves the goal of drawing up a list of indicators to measure imbalances, with the aim of making growth more stable and less prone to cycles of boom and bust.

In comments similar to ones he has made in the past, the Fed chairman said faster growth in emerging markets is one factor driving strong capital flows into those economies. Furthermore, emerging market policy-makers have tools at their disposal -- including exchange rate adjustment -- to prevent overheating, he said.

The argument that greater currency flexibility is necessary to right imbalances is a recurring theme for U.S. officials who have persistently sought to pressure China to allow its yuan currency to float more freely against the dollar.

U.S. officials say that by keeping the yuan weak, the Chinese government is supporting an export-led economy that leads to its large trade surplus with the United States.

Washington wants to keep the spotlight on the yuan at the

G20.

"The maintenance of undervalued currencies by some countries has contributed to a pattern of global spending that is unbalanced and unsustainable," Bernanke said.

Advanced economies are also experiencing the ill effects of strong capital flows into emerging economies in the form of higher prices, Bernanke argued.

The S&P 500 .SPX, which has risen 4.2 percent so far this month, has doubled its value in less than two years, the quickest 100 percent gain since the Great Depression.

However, volume has been light in the most recent leg of the rally, with just 6.7 billion shares changing hands Thursday on the New York Stock Exchange, NYSE Amex and Nasdaq combined -- the second-lowest so far in 2011.

A Group of 20 meeting will be on investors' radar screens, as the world's top central bankers take center stage on Friday ahead of the two-day event charged with tackling global imbalances.

In a paper prepared for the meeting, the International Monetary Fund said the United States' policy of quantitative easing could cause a destabilizing flood of capital, though it conceded this had not happened so far.

Political unrest in the oil-producing Middle East and North Africa region is also likely to be closely monitored, as crowds in Libya, Yemen, Iran and Bahrain take to the streets in public displays of anger toward their governments.

In company news, U.S.-based alternative share trading platform BATS Global Markets is near a deal to buy peer Chi-X Europe for more than $300 million in stock, a source close to BATS said on Thursday.

Apple Inc. (AAPL.O)chief executive Steve Jobs, on medical leave from the company he co-founded, attended a meeting of technology industry leaders with U.S. President Barack Obama in northern California on Thursday.

Time Warner (TWX.N) ousted Jack Griffin, the head of its publishing unit, after fewer than six months in his job due to what insiders described as a polarizing management style.

Chemicals group DuPont (DD.N) extended its 33.4 billion crown ($6.1 billion) offer for Danish food and enzymes group Danisco (DCO.CO) to April 1, hoping to gain more acceptances as regulators clear the deal.

On the earnings front, Campbell Soup (CPB.N) is expected to report second-quarter results on Friday.

European shares on the FTSEurofirst 300 .FTEU3 slipped in early trade, giving up some gains after hitting 29-month closing highs in the last four consecutive sessions.

(Reporting by Harpreet Bhal; Editing by Mike Nesbit)

Speaking hours before the start of a meeting of G20 finance ministers and central bankers, Yoshihiko Noda said he was not sure they would reach any agreement on a set of indicators to assess economic equilibrium.

"It is uncertain whether the countries will agree on all indicators, but I think agreement on some is possible," Noda told reporters.

"From working group discussions, I get the impression countries are now split in half about their opinions."

In preparatory talks on Thursday, G20 sources said China and Germany dragged their feet over a balance of payments indicator while Beijing was resisting including measurements of the real foreign exchange rate and currency reserves in the package.

Chinese central bank governor Zhou Xiaochuan, in Paris for the G20 meeting, said Beijing would decide the pace of the appreciation of the yuan on its own and would be swayed by pressure from other countries.

A German source cast doubt on a deal at the two-day Paris session, saying Berlin wanted nothing less than a full list of five indicators to be used to tackle global mismatches.

"It is hard for us to imagine leaving some out, for example leaving out the currency-related ones while holding on the current account one," the German source told Reuters.

TWO-STEP

France has run into opposition with its push for greater transparency and regulation of commodities prices and a reform of the international monetary system and is pinning its hopes on measuring imbalances in the world economy, where the G20 nations account for around 85 percent of GDP.

French Finance Minister Christine Lagarde said she hopes the first ministerial meeting of France's year-long G20 presidency would agree a preliminary list of indicators in a two-step process leading to guidelines for more coordinated global economic policies by the end of the year.

With world shares hitting fresh 30-month highs, driven by bullish views of economic growth, investors seem content for the G20 to achieve little, in contrast with the height of the crisis two years ago when markets were baying for policy action.

"Some may view this sort of outcome as a lost opportunity to prevent future risks, but markets would probably not welcome a heavy-handed attempt to subjugate domestic priorities for the sake of external balance, which could be disruptive unless done just right," Barclays Capital wrote in a research note.

The world's top central bankers were expected to discuss commodity price inflation and how to handle the divergence between booming emerging market economies and sluggish growth in most developed economies in a public debate on Friday.

Bank of Japan Governor Masaaki Shirakawa acknowledged that loose monetary policy in the developed world was pushing capital into emerging economies and helping inflate commodities prices but said it was necessary nonetheless.