A weekend of roundly positive news on the war front helped spur stock proxies sharply higher midday Monday, putting the market on track to eclipse some technically significant levels. Most importantly, the

S&P 500

and

Dow Jones Industrial Average

are on track to surmount their respective 200-day moving averages, an accomplishment considered key by followers of technical analysis.

As reported

here last week, the S&P and Dow have repeatedly faltered in recent weeks after approaching --and in mid-March eclipsing -- their 200-day moving averages, currently around 882 and 8370, respectively. As of 1:26 p.m. EST, the Dow was up 2.2% to 8456.43 and the S&P 500 was up 2% to 896.62.

Meanwhile, the

Nasdaq Composite

has been above its comparable level since mid-March and was putting more distance behind it, lately up 2.4% to 1416.94.

In addition to the 200-day moving averages, some traders were enthused that the S&P -- and most traders focus on that index -- was also on track to potentially best its March 21 closing high of 895.79, which would snap a string of lower highs for the index.

Should these levels be sustained on a closing basis -- and major averages were lately off their morning highs -- they would confirm the validity of the rally from the March 12 lows, in the eyes of some technicians. Many chart readers, or traders with merely a casual awareness of technical analysis, use the 200-day moving average as an indicator of a rally's staying power, or lack thereof. A move above the 200-day level could potentially generate another round of buying from those participants heretofore waiting for "confirmation" of the rally's sustainability. Eclipsing the previous highs is the proverbial icing on the cake.

"If the senior index

the Dow can better its 200-day moving average, it would render an objective of 8522," which was the high on March 21, commented Jeffrey Saut, chief equity strategist at Raymond James. "Above 8522, with a concurrent move by the

Dow Jones Transportation Average above its March 21 reaction high of 2265, would turn the secondary trend of the market positive." (That's another way of saying "a bull move within a still negative, or bear market cycle.")

As of 1:29 p.m., the Dow Transports were up 3.7% to 2269.42 after having traded as high as 2272.68.

On the other hand, market watchers who've been buying in anticipation of another war-related surge might use Monday's rally -- and surmounting of technical indicators -- as an opportunity to start selling into strength.

On March 20 and again on

March 31, Rick Bensignor, chief technical strategist at Morgan Stanley, recommended traders be aggressive buyers if the S&P 500 pulled back into the 835 to 850 area, the closer to 840 the better. On Monday, Bensignor recommended traders "take off 50% of that long in the 900-912 area."

Thus far, the S&P has traded as high as 904.89.

Bensignor made similar recommendations for Dow holdings in the 8450-8650 range after last month recommending traders get aggressively long in the 7870-8020 area.

The Dow has traded as high as 8520.21 intraday. Not coincidentally, that's just below its March 21 high. A failure to move back above that level will convince some traders that Monday's advance represents the end of the recent rally, rather than the start of another up move.

"Although we ultimately believe the S&P 500 will make its way up to last summer's high" -- of around 965 intraday on Aug. 22 -- "a likely pause could take place and taking partial profits is warranted, in our view," he wrote.

This kind of technically driven trading gets to the essence of a story

here last week about the growing necessity for traders to be nimble in the current environment. It also reflects underlying concerns about the troubling fundamentals, most notably economic data and the lack of corporate earnings power.

"As the technicals have been improved by the war-induced rally, the economic statistics and the fundamentals have not," wrote Saut. "In fact, they have actually worsened. Consequently ... this feels more like an upside blow-off rather than the beginning of another leg of the war rally."

Alcoa

(AA) - Get Report

, traditionally the first Dow component to post quarterly earnings, posted better-than-expected first-quarter results late Friday, and its shares were lately up 9.6%. Another big-cap name on the move was

AOL Time Warner

(AOL)

, up 7.3% after a Morgan Stanley upgrade.

Still, Alcoa's earnings were down more than 30% from year-ago levels, and last week's spate of warnings, particularly in the software sector, has some traders concerned about the forthcoming earnings season. Last's week's putrid economic data certainly have some observers worried.

In keeping with recent trends, the dollar was higher in concert with stocks, while Treasuries, gold and oil prices were lower. However, crude futures had risen from their earlier low of $27.15 per barrel after OPEC announced it will meet on April 24 to discuss possible production cuts. Crude was lately down 1.5% to $28.20 and its stabilization was partially responsible for stock proxies fading a bit from their early highs.

The (very) good news is allied forces continue to make impressive progress on the war front. Monday's reported discovery of Iraqi chemical weapons will boost President Bush's rationale for going to war, potentially silencing (or at least mollifying) many of his skeptics. However, at some point Wall Street is going to have to focus on the fundamentals -- if not the potentially long process of rebuilding Iraq -- and that is likely to prove less sanguine for shares.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.