- Technical Market Commentary -

October 7, 2010 (FinancialWire) (By Dr. Joe Duarte) (Entire article at http://www.investrendsyndications.net/12-content/manl/duarte/2010/10/php/06.php) (Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries) — The S&P 500 SPDR ETF (AMEX: SPY) made a new high on 10-5, following the footsteps of the S&P 500 Index, which broke out above the 1150 area. This is a bullish development, but is also worth parsing.

First, the breakout came some two weeks (9-17-2010) after the S&P 500 broke out above 1131, another key resistance level that took three attempts, from June to September to accomplish. That means that the break above 1131 was meaningful, given the amount of effort and persistence exhibited by the bulls to accomplish it. That it took two weeks or so for the next up leg in the S & P 500 to materialize can be looked at in two ways.

One is that it didn’t take long enough to accomplish and thus it may not hold. The other is that the bears, after three months of fighting over the 1131 chart area, are now fairly vanquished and that the bulls will have an easy time for the near future.

If you’re a fan of easy money, you’ll go with the latter interpretation of the rally. If you’re worried about inflation and the Fed stoking another bubble by printing its way out of the remains of the bubble that just imploded, you have a point. But, if you miss a huge rally that may have just started, you’ll feel terrible.

What we’re saying is that no one really knows how this market will proceed from here on. So far, the charts have been very reliable. So until proven otherwise, you have to go with the charts, if you’re a trader. By the same token, you also have to give yourself some breathing room, given this market’s penchant for small periods of volatility over days in between moves that signal some sort of trend, up or down.

The real question that must be answered is whether anything has changed in the past three weeks. Sure, some of the economic data has been fairly good, especially compared to what it was a year ago. But, the housing sector is still in horrible shape, isn’t it? It is if you’ve lost your home, or the home you own is worth less than when you bought it.

But, then, if you’re one of those people whose foreclosure proceedings are in the midst of some institutional snafu, you’ve gotten a lucky break, because no one really knows when the bank will get its stuff together enough to kick you out.

What’s our point? In this market, and in this economy, anything is possible. And that means that if the Fed says that it’s going to print money, you have to believe them, until proven otherwise. And as everyone knows, the best friend that the stock market can ever have is easy money.

So can easy money save the world? It sure can make it feel that way for a while. And a well traded “while” is often all that anyone needs to make a fortune.

(Go to http://www.financialwire.net/?s=drtjby to see more commentaries by Dr. Joe Duarte, and go to http://www.financialwire.net/2010/05/01/about-duarte/ for more about Dr. Duarte.)

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