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Well, if you had any question to how the market would react to a perceived victory in Iraq, you are going to get an idea today. As I write, the European markets are up 3% to -5% and the domestic futures markets are spiking higher.

I am careful to use that word "spiking" because last Wednesday, I wrote that the markets were not up on a spike, were not overbought and had the potential to trade 5% to 7% higher to the upper end of the daily trading range. Clearly, today's action should put the market up on a spike, create an overbought condition and bring the major market indices within shouting distance of resistance -- in other words, create the same condition in the markets that led to a prior consolidation period.

Action brings market closer to upper end of trading range resistance zone

The coming few sessions are going to be rather important because over the past week, poor economic numbers and negative earnings statements have gotten a free pass because of the war in Iraq. As the market spikes higher and more time goes by, that positive influence is likely to wane and the reality of the fundamental backdrop should begin to have an increasing influence on stocks.

At the end of last week, I discussed how that "free pass" is a positive near-term influence, but may be a more negative intermediate-term influence. That's because the market is trading higher on something that cannot be proven true of false: hope. Over time as the market rallies, if the hope proves to be excessive, the market moves back down. The result is the trading range environment over the past year. The hope brings the market to the upper end of the range, but it is likely to take some solid reality to break it through.

Lastly, God bless our troops and their commanders. Way to go folks!

A little early for Daisy's bikini I guess.
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