The Dow Jones Industrial Average got pretty close yesterday to breaking the 10,000 point mark for the first time since the ‘08 crash. It’s no surprise that there has been much attention paid to this. It is, after all, a significant number, even if it’s mostly psychological.

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Ask yourself, “Does the fact that the DOW crosses a given threshold really mean that much?” Isn’t it the overall trend (direction and momentum) more important? Well, yes and no.

The DOW crossing the 10,000 point mark doesn’t mean that the market is in a definitive bull phase, or that the recession has officially ended. It’s not significant in that sense, but it is in a psychological sense. The market, which is nothing more than the aggregate opinion of all investors, has made 10,000 the hurdle of the moment and because if that very reason – and no other – it is significant.

It may not be today, and it may not be tomorrow, but rest assured that the DOW will cross that 10,000 boundary eventually (and probably soon), and when it does, you’ll need to decide how it effects you.

Because so much emphasis is being placed on this figure, many investors will be using it as a bell weather. My gut is telling me that when the DOW does break 10,000, it won’t stay there for long. I think many investors will use that mark as a time to take some profits off the table which in turn will drive the price of stocks back down a bit.

What does this mean? Well, it means that if you’re one of these traders you’d better get your timing right. But it also means that if you’re looking to buy back into the market soon, you might consider only doing so with part of your money, and keep some set aside for any potential dip in the value.

By doing so, you are ensuring that you will have some money invested whether the DOW blasts past 10,000 and keeps running, or if it drops back to 9,700 or so you can pick up some more potential bargains on the weakness.

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Earlier, I blogged about how the Dow was having trouble crossing the 10,000 point barrier. The basic premise was that the recent market rally was not due to fundamentals, but rather due to the market previously being over sold.

Well, a recent article from the AP points out that “Alcoa returns to profit as cost cuts”, which I think supports one of my other thoughts on the rally. Namely, that the recent “good earnings” are not a sign of fundamental growth and profitability but rather due to reducing overhead.

“Painful cost-cutting and rising sales to automakers helped the nation’s largest aluminum producer return to profitability for the first time in nine months.”

This is an essential part of the market healing itself, but you can’t cut your way to growth. Unless the fundamentals change, the recent rally is going to run out of steam, if not head back down for a double dip.

I can’t predict the future, but I think this bears consideration and some caution may be prudent.

Still, there is some good news abroad in all this:

“We do clearly see growth, substantial growth … in China,” Alcoa CEO Klaus Kleinfeld told analysts and reporters after the company reported results. “(The) second half of the year is clearly better than the first half in many industries and many regions.”

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The recent market rally seems to have stalled. Is it because the Institute for Supply Management’s index of national factory activity declined in September? Is it because U.S. Auto sales dropped again, once the artificial stimulus ended? Is it because the unemployment claims rose unexpectedly again? Is it because the consumer confidence index fell? Or is it because the Dow was getting close to breaking the psychological barrier of 10,000?

Personally, I think it’s all of the above – and more.

I think that the recent rally has largely been due to the realization that the economy is not going off a cliff, and it is not going the way of the that of the USSR after its breakup. It’s a sudden elation that we’ve hit bottom, and the sun still rises and life goes on. In other words, it’s not based of fundamentals.

It may appear on the surface that it’s the fundamentals. After all, corporations are posting some increases in earnings, or less loss of earnings. But compared to what? Compared to 2008, you’d almost have to post big improvements, wouldn’t you? The recent earnings are really a reflection that things in 2009 aren’t as bad as the end of 2008. But is that the same thing as “good”?

What’s going to happen in the next 6-12 months? What are corporate earnings going to look like then? See, I think the market is considering this and it’s manifesting itself in this rally’s pause.

Investors are looking ahead to that 6-12 month time frame, and they’re not sure they see much real economic growth. Maybe I’m wrong, but there’s a lot of unknowns that are coming down the pike, like how much are consumer credit losses going to be, or what happens to the housing market when all those ARMs reset. How much will banks lose when commercial real estate loans start defaulting?

The job market isn’t showing any signs of turning around, and if consumers don’t have jobs, they don’t have incomes. And if credit is hard to come by, or the consumer is just plain gun-shy when it comes to borrowing, they aren’t likely to increase spending.

Time will tell, but I’m getting the sense that the market is returning to a more rational place, and starting to question the “green shoots” hype.

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