ASTONISHINGLY, the Dow Jones Industrial Average (DJIA) has remained above the 9,000 mark after breaching the psychological level on Thursday evening for the first time for what felt like ages. Back in early March when the Dow plummeted to 6,440.08, only the ultra-bullish investors thought 9,000 would be on the cards this year. <br /><br />But after trading sideways for much of May and June, the second quarter earnings season, and the generally positive results from the banking sector, has given the Dow a much-needed boost and pushed it through the key 9,000 resistance level.<br /><br />Barely three months after those March lows, some are beginning to contemplate how soon US stocks could reach their pre-September 2008 levels of over 11,000. <br /><br />Kully Samra, director of UK broker Charles Schwab’s City branch, certainly doesn’t think the index is overbought at above 9,000. <br /><br />“The market has gone a long way in a very short space of time but we are still very positive and continue to have a cyclical-oriented sector weighting and think defensive stocks will be out of favour,” he says<br /><br />“We are overweight on US industrials, information technology and materials. We do expect some pull back in information technology but this will give investors the opportunity to enter the market on the dip,” Samra adds.<br /><br /><strong>OVER-EXTENDED MARKET<br /></strong>This might seem like good news for spread betters looking to jump into the US market on the back of the earnings season, but ultimately, your trading decision will depend on whether you think that the market has over-extended itself and is due a retracement over the coming months. <br /><br />Many analysts are suggesting that current earnings estimates and performance of equities seem over-optimistic given the macro outlook, according to Nouriel Roubini’s RGE Monitor. And Gluskin Sheff’s David Rosenberg is one such analyst that remains sceptical of a sustained equity rally.<br /><br />In his morning commentary on Friday he says: “Friends, this is a faith-based rally, pure and simple. And, as powerful as it is, this rally to new post-Lehman highs is being driven primarily by the technicals. Momentum is extremely strong at this time, and this often exerts a self-perpetuating move in the market, and in both directions.” <br /><br />His concern is with valuation to some extent, as he believes that the market (and the consensus) is discounting an earnings stream for 2010 which he thinks won’t occur much before 2012. Volumes and fundamentals indicate that we are still in a bear market as stocks are rallying in the face of what has been a mixed earnings season at best.<br /><br />He adds: “Earnings may be beating low-balled estimates for the majority of S&P 500 companies, but there is no questioning the fact that we are also seeing a sustained decline in revenues. Weak top-line growth is being driven by weak employment trends and by the persistent social trend towards frugality, which is still in its early stages.” <br /><br />Short-term spread betters will be happy to play the markets day by day, but the medium-term directional trader won’t want to get caught out by a reversal in sentiment. While the bulls will be pleased that the equity markets seemed to have shrugged off poor results from tech stocks at the end of last week, unemployment and a fragile economy will undoubtedly weigh on the Dow for some time to come.