The market continues to grind higher. The prevailing thought on "the street" is that the credit crisis is overblown. Traders are focusing on solid earnings, strong balance sheets and low interest rates. Economic conditions are not recovering at the pace everyone would like to see, but the consensus is that better times lie ahead. The SPY is within striking distance of a new high for the year. Earnings season is almost over and the economic news is light. That means that the upward momentum will continue and it could be fueled by option expiration.

This morning, the long-awaited Unemployment Report was released. Many analysts felt that bad weather would adversely impact the number and estimates were revised lower. Regardless of how the number actually came out, the market seem prepared to rally off of the release. The unemployment rate held steady at 9.7% and 36,000 jobs were lost in February. This was better than the 50,000 job losses analysts projected. Job losses for January and December were revised to show 35,000 fewer jobs. All told, the market loved this number.

After a steep decline in January, the market has been able to claw its way back. Bears see a looming credit crisis that will freeze the financial system and bulls see strong balance sheets, excellent profits and low interest rates. A tug-of-war has resulted and the market has been stuck in a range the last four months. Eventually, one side will prevail and that breakout will determine the market's future direction. The economic news has been decent this week. ISM manufacturing and the ADP employment index came in as expected. ISM services jumped to 53 and that was better than expected.

February ended well for the ETF Extremes with a 22.4% gain for the month. You can check it out at the following link: http://etfextremes.collective2.com

As for March, well, I placed another trade today that can also be seen at the former link. The NASDAQ 100 (QQQQ) had pushed into a short-term ...

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In today's chart you can see that the market has been in a relatively tight range between SPY 108 - 112 during the last four months. We had a small break out to new highs and a brief dip below that level. Bulls and Bears are fighting it out and in the next few weeks we should have a breakdown. Bulls argue that solid earnings and low interest rates present attractive stock valuations. Corporate balance sheets are strong and companies have dramatically reduced expenses. Any uptick in demand will go right to the bottom line.

A warning shot was fired in January and the market dropped sharply from relative highs. It established support two weeks ago and a half-hearted rally brought us back above the 100-Day moving average. The volume during the decline was much heavier than the volume during the bounce indicating that there was more downside to come. Resistance at SPY 112 was not even tested before the selling resumed. This morning, the S&P 500 futures are down 17 points on the open. Initial jobless claims were weaker than expected and the employment picture is not improving.

The current situation reminds me of a period from the middle of 2007 to the middle of 2008. Many analysts were forecasting a credit crisis, but there weren't any "dead bodies" and no one knew when the storm might hit. During that time, the market was in a general decline, but there were many decent rallies. Earnings were good, employment was solid and the economic news was stable. On the surface, everything was fine and nerves were easily calmed when bullish news hit the market. Once Countrywide and IndyMac failed, the tone changed and sustained selling began.

Yesterday, the market staged an impressive light volume rally. It closed near the high the day and it is well above SPY 108. Once the early momentum was established, sellers pulled their offers. This morning, the rally is continuing. Housing starts and industrial production were better than expected and that has provided a small bid to the market. Earnings from John Deere and strength in Europe also provided support. Spain held a 15-year bond auction and the bid to cover was just over 2. That is a good showing for a longer term maturity in a country that has 20% unemployment.

The first trading day of the week continues to be strong. Over the last four months it has consistently opened higher. Today, decent earnings and a little M&A activity helped to boost the market. The situation in Greece has not improved and laborers plan to strike. Meanwhile, the EU has taken a hard line approach and Greece has until May 15 to prove that it is serious about balancing its budget. If Greece cannot materially cut spending, financial support will be withdrawn.