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Technicals Suggest QE3 Advance Has Legs: Pro

Friday, 14 Sep 2012 | 8:00 PM ET

With the Dow up almost 300 points this week, is the QE3 advance sustainable?

Kudlow: This is Not Your Father's QE
Larry Kudlow worries that the stimulus could be more of an Achilles Heel than a boost to the economy.

On CNBC’s Kudlow Report, Jim Lacamp of UBS said the price action confirms that the rally is for real.

“We had a breakout in the market on volume,” he said.

Pros often look at the volume of shares traded in a rally to see if the enthusiasm is widespread. In this case, it is.

“We also had confirmation from the Transports, they rallied,” he added. According to Dow Theory, an advance in the DJIA needs to be confirmed by a similar advance in Transportation Index .

“Also the Russell rallied,” he said. A rally in small cap stocks suggests investors are more willing to embrace risk. (Small cap companies are considered higher risk investments.)

“In addition commodities and precious metals are moving. (For pros who follow technicals), all this action confirms the move,” said Lacamp.

However, Lacamp added that the rally may not last indefinitely. “Eventually markets will turn attention to the election and the fiscal cliff,” he reminds. And that will likely be bearish.

However, in the near-term he says the important takeaway from the price action is that “it’s a tradable rally and a real rally.”







Tune in:

"The Kudlow Report" airs weeknights at 7 p.m. ET.

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"