Spurred by more signs of economic recovery, the dollar and major averages rose this week, which featured new 52-week highs for the

Dow Jones Industrial Average

and

Nasdaq Composite

. But Friday's intraday reversal and the

S&P 500's

struggle to stay above 1000 were notable caveats.

Raised guidance from

Intel

(INTC) - Get Report

sent shares sharply higher early Friday, but the gains slowly eroded, and major averages drooped in the afternoon. After trading as high as 9499.97, the Dow closed down 0.8% to 9348.31 while the S&P ended off 1% to 992.97 vs. its intraday high of 1011.01. The Comp slid 0.7% to 1765.30, well off its early best of 1812.50.

At 1.3 billion shares on the

Big Board

and nearly 1.7 billion over the counter, Friday's volume was down from Thursday's peak but not dramatically so, while losers led decliners by about 2 to 1 in both venues.

Friday's about-face dampened the major averages but did not prevent them from posting weekly gains. For the week, the Dow rose 0.3%, the S&P 500 added 0.2%, and the Nasdaq climbed 3.7%. The Dow hit a 14-month closing high of 9428.90 on Tuesday, while the Comp set a 16-month closing high of 1777.55 on Thursday. The S&P, conversely, couldn't reach its mid-June high of 1015.

On some level, the S&P's nonconfirmation, along with renewed concerns about

Freddie Mac

and financials in general, may be a "good thing" for those long. Many participants continue to dismiss the rally, which may augur more gains ahead. (The Philadelphia Stock Exchange/KBW Bank Index fell 2.1% for the week while Freddie lost 2.3%.)

Then again, assessing the true state of investor sentiment is a tricky thing, as discussed

here. While some observers see persistent negativity among market professionals, "the traders typically most wrong are enthusiastic," said Jason Goepfert, president and CEO of Sundial Capital Research, a St. Michael, Minn.-based firm that publishes sentimentrader.com.

While conceding more traditional indicators such as Chartcraft.com's

Investors Intelligence

survey show bullishness not at extreme levels, Goepfert said measures of smaller retail participants do show runaway enthusiasm. These include the Commitment of Traders' Report, which shows that the "small trader" category has increased its long S&P 500 position for a record 11 consecutive weeks, despite the index's relatively flat performance. In addition, equity-only put/call ratios are at their lowest levels in history when the

Nasdaq 100 Unit Trust

(QQQ) - Get Report

is excluded, he said, describing the QQQs as mainly an institutional vehicle. Finally, there's been a much higher level of assets going into high-beta funds offered by Rydex vs. their low-beta counterparts.

"From my perspective, there's a huge amount of speculation

and betting on further upside," Goepfert concluded. "As long as we're under 1015 on the S&P 500, this kind of speculation doesn't end well."

In other words, many short-term traders are far more effusive than this week's market action dictated is prudent.

Something for Everyone

Depending on one's perspective, there were multiple ways in which to assess the week's action. Optimists could say the market overcame negative developments such as

Hewlett-Packard's

(HPQ) - Get Report

results,

Schering-Plough's

(SGP)

TheStreet Recommends

cutbacks of guidance, dividend and staff, and a weak consumer confidence report from the University of Michigan. Investors also had to contend with the bombing of the U.N. building in Baghdad, the near unraveling of the Israeli-Palestinian "road map" and the "Sobig" computer worm.

Conversely, skeptics can claim the market failed to make dramatic progress despite a slew of optimistic developments, including positive guidance from Intel,

Broadcom

and

Wal-Mart

(WMT) - Get Report

, better-than-expected results from

Lowe's

(LOW) - Get Report

and

Staples

(SPLS)

, and mostly upbeat economic data.

This week's calendar included a 17-year high for housing starts, a five-year high in the Philadelphia Fed survey, and a drop in the four-week average of weekly jobless claims to its lowest level since February. Also, the index of leading economic indicators rose for a fourth-straight month for the first time since February 2002.

On Friday the Economic Cycle Research Institute's weekly leading index rose to 127.6 for the week ended Aug. 15, from 127.4 the preceding week. However, the index's four-week moving average slowed to 12.7% from 13.2%.

The economic data helped the dollar post its best week vs. the euro in over two years. Late Friday, the euro was trading at $1.089 vs. $1.1257 on Aug. 15. On Thursday, the euro fell below its 200-day moving average at $1.0940 for the first time since April 2002, noted MG Financial Group.

The dollar actually fell vs. the yen, trading at 117.55 yen late Friday vs. 119.25 a week earlier. The Japanese currency was bolstered by signs of growth and a 4.2% weekly rally in the Nikkei 225. Still, the dollar index rose 2.2% for the week, thanks mainly to the greenback's strength vs. the euro.

Somewhat surprisingly, the yield on the benchmark 10-year Treasury fell six basis points to 4.47% this week despite the mostly strong economic reports. However, yields did rise from Tuesday's low of 4.36% as various

Federal Reserve

officials reiterated the central bank's commitment to maintaining the currently low fed funds rate.

"We are not in a hair-trigger situation to tighten policy," San Francisco Fed president Robert Parry said in a speech Thursday.

However, "constant Fed-speak of no tightening for a long time is

causing

market-based interest rates to rise," commented Jim Bianco of Bianco Research in Chicago. "The

Treasury market does not need more 'explanation' and 'clarity' of the Fed's intention. Rather,

the market wants the Fed to stop this policy

of promot

ing growth at the risk of creating inflation." (Emphasis his.)

Given the Fed's intransigence, Bianco suggested the so-called bond vigilantes will send rates higher "until

rates get to the point that they 'offset' the Fed's monetary stimulus."

Rising yields being one more thing for traders to worry about after a week in which stocks often teased but didn't provide a clear resolution as to their near-term direction.

Tune-In TaskMaster

I'll be back on WABC radio's "Batchelor & Alexander" show Friday night, around 9:15 p.m. PDT/12:15 a.m. EDT (i.e. Saturday morning for East Coasters.)

The show is nationally syndicated, so check www.wabcradio.com for local listings or Webcast options.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.