The Weekly Report for May 21st, 2007

Market Summary - A Time To Take Profit?

The Dow's run into uncharted territory continued as the index surpassed the 13,500 level for the first time in history. Last week's surge was aided in part to higher-than-expected consumer confidence and various corporate buyouts. It seems like only yesterday that we were asking ourselves whether traders would be able to send the Dow above 13,000 - the psychological barrier that is now a fair distance away from current levels. The question now becomes where will this run end? Is 14,000 next? I think most traders would agree that this rally is unsustainable at the recent rate, but trading against the trend will be dangergous and timing a correction will be extremely difficult. It may be wise to take some money off the table and wait for a clearer picture of what will prevent this rally from correcting.

In our last report, we mentioned that various economic realeases would continue to be the important catalyst that would help keep the uptrend from correcting. Sronger-than expected consumer confidence numbers were definitely welcomed by the bulls. The markets are currently in an interesting state because continued strength on the economic front could keep the rally moving higher. However, with any signs of weakness we could see a quick correction toward the support of the longer-term moving averages.