What a Week: Bulls Well-Fed

Bulls argue that housing weakness, like the current weakness in the U.S. auto industry, is an isolated problem that strength elsewhere in the economy can offset. But Schilling says the excess inventories in the housing market and the excess inventories at the auto companies are both symptoms of the same disease.

"It's excess inventory that is the real nemesis for economic cycles," he says. "There's a sense of euphoria out there and there's a tremendous amount of money sloshing around the world in private equity, commodities and carry trades, and that can keep things going for a long time."

On Wednesday, DaimlerChrysler (DCX Quote) acknowledged the tough realities facing its U.S. business, announcing a sweeping restructuring plan that will cut 13,000 workers over two years and shutter a number of manufacturing plants.

The automaker's shares jumped 14% for the week, partly because investors like the cost-cutting measures, but mostly because the company's management signaled that its troubled U.S.-based Chrysler Group could be on the block.

Meanwhile, in yet another sign that speculators are taking the reins, the tech-laden Nasdaq is leading the major stock indices for the year, up 3.2%, compared with the Dow's 2.3% gain and the S&P's 2.5% increase.

Even with Friday's loss after its CEO, Steve Ballmer, tamped down expectations for the release of its Vista operating system, Microsoft (MSFT Quote) is trading at $28.74, up 28% since May. Cisco (CSCO Quote) is up 41% over that span.

The gains in the tech sector suggest that the stock market has finally shaken off its fears. But when it comes to Nasdaq rallies, investors know from experience that the harder it comes, the harder it falls, and someday, Bernanke will have to learn how to talk to bears, too.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting