Heading into the third trading week in Ocober, the rally in the S&P, which started in earnest after Bernanke announced on national television that the Fed was “electronically” printing dollars, appears to be as intact as ever.

What exactly does printing dollars have to do with rising stocks? Well, when stocks (and commodities) appreciate, what exactly are they “appreciating” against? The dollar of course. And what you also need to realize is that this relationship is a two way street, meaning that while rising stocks and commodities will weaken the dollar, the reverse is also true in that the Fed can ignite a stock rally by actively depreciating the dollar.

Meanwhile, there’s been a lot of improvement in the economic data and the ones I look at specifically are those issued by the Institute for Supply Management (ISM) because those indicators tend to be leading. I also pay close attention to the specific components in those reports and from what I’ve seen, there’s been plenty of improvement.

On the corporate profit side, roughly 70% of the U.S. companies that have reported 3rd quarter earnings have beat analysts’ estimates and what’s even better, many have upped their outlooks going forward. For example, Apple reported after Monday’s market close and its sales and profit numbers beat analysts’ estimates on back-to-school demand for iPhones, iPods and Macintosh computers. Incredibly, despite the weakness in the global economy, Apple shipped 7.4 million iPhones last quarter. The stock rose to it’s highest-ever price in after-market trading.

So, the main reason to see a continuation in all the euphoria is basically that there’s no reason to see a large pull back or correction. In fact, we may now be in a “melt-up” situation where money managers who’ve been too timid to partake in all the fun now become desperate to show some returns in the 4th quarter decide to throw in the towel and just start buying.

Of course, all this stock and commodity appreciation will have a dependably negative effect on the USD. My personal favorites continue to be the A$ (where you get paid a nice carry), the euro and the C$ (a play on rising oil).