The Weekly Report for May 14th - May 18th, 2007

Market Summary - Can The Rally Continue?

The Dow's run into uncharted territory continued as the index has notched an impressive 25 of 31 sessions in the positive. In our last report, we mentioned that the relative strength index values for the major indexes were showing that the markets were becoming overbought and that many traders were questioning whether this rally would be able to conitnue. We also noted that more positive economic news would be needed to help fuel the rally, but Thursday's less-than-impressive retail sales numbers and the widening trade deficit triggered the sharpest selloff in two months.

Luckily for the bulls, Friday's mild inflation data helped push the indexes to the levels where they were trading earlier in the week. The results from various economic realeases will continue to be the important catalyst in the weeks ahead as any further weakness could trigger a selloff toward the support of the 50/100-day moving averages.