This holiday-shortened week was short but sweet for those long stocks. Conversely, it was a miserable week for those still bearish as momentum seemingly begat momentum.

The Dow Jones Industrial Average rose 2.9% this week and 4.4% in May while the S&P 500 gained 3.3% for the week and 5.1% for the month. The Nasdaq Composite climbed 5.7% this week and soared 9% in May, notching its fourth-straight monthly rise, the longest streak since late 1999, Bloomberg reported.

The terror-alert level was lowered Friday and progress appears to be occurring in the Middle East peace talks. But the macroeconomic backdrop remains murky. Given the latter, the action seemed largely a function of month-end considerations -- especially Friday -- and fund managers' fear of falling further behind the market's postwar melt-up.

"Benchmark chasing is in full gear, as portfolio managers continue to grab at upwardly surging stocks," Rick Bensignor, chief technical analyst at Morgan Stanley, opined Friday. "Previous naysayers are now 'paying the piper,' and in doing so, they are causing stocks to thrust higher."

In sum, fund managers skeptical of the rally as it advanced from mid-March through April scrambled to get long in May. The risk was too great of falling further behind in the all-important monthly and quarter performance races. Rather than looking for names that had lagged, and might be relatively cheap, these managers sought stocks already exhibiting big upward momentum, such as biotech and Internet names.

"I believe that under-invested portfolio managers went after these two groups in order to capture beta, giving them some hope of catching up to the performance of their elusive benchmarks," Bensignor commented.

For the week, the Amex Biotech Index rose 3.8% while the Philadelphia Stock Exchange/Street.com Internet Index rose 6.2%. Among other notable leaders, the Philadelphia Stock Exchange Semiconductor Index rose 11% and the S&P Homebuilding Index climbed 4.8%, the latter following better-than-expected earnings results from components such as Toll Brothers ( TOL) and Hovnanian ( HOV).

(On Friday, homebuilding stocks rose despite a Legg Mason downgrade of K.B. Home ( KBH), NVR ( NRV) , Pulte Homes ( PHM), and Ryland Group ( RYL); each ended the session higher.)

Few, if any, fund managers will publicly admit to playing the momentum game. But the issues of "momentum" and "performance chasing" were certainly themes this week while bubble-era heroes such as Ryan Jacob and Paul Cook were resurrected by CNBC.

"The need to keep up is weighing very heavily on portfolio managers right now," agreed Brad Ruderman, managing partner of RCM Partners, a Los Angeles-based hedge fund. "Many portfolio managers are seeing new cash for the first time in a while and the more the market goes higher, the need grows to put it to work, at any price." (Equity fund flows have been steadily positive in recent weeks and totaled $2.8 billion for the four days ended Wednesday, according to AMG Data Services.)

By "at any price," Ruderman explained how "valuations are taking a back seat to the supply/demand for equities." The higher the market goes, pressures on those who've "missed the move" get exacerbated, he continued, suggesting that's why "the market does not stay down for long."

Take What You Will

Such pressures also explain why market participants eagerly glommed onto any sliver of positive economic news this week, while mainly ignoring negative developments. This was glaringly evident Friday as traders focused on a better-than-expected Chicago Purchasing Managers survey rather than an unexpected 0.1% drop in April personal consumption. The University of Michigan consumer sentiment index came it at 92.1, its highest level since June 2002, but down from a preliminary reading of 93.2 and below consensus estimates of 93. The Economic Cycle Research Institute (ECRI) reported its weekly leading U.S. index was flat at 121.5, although its four-week moving average rose to 4% from 3.2%.

"There are positives and negatives here really," said ECRI research director Anirvan Banerji in a statement. He was referring to the leading index, but accurately summed up all the day's data.

Given traders' propensity to accentuate the positive, the Dow rose 1.6% to 8850.26 Friday while the S&P 500 climbed 1.5% to 963.59 and the Comp rallied 1.3% to 1595.91. The Dow ended Friday at its highest level since mid-January, while the S&P came within a hair of eclipsing its August 22 high of 965, a closely watched resistance level. The Comp, meanwhile, is at its highest level since May 31, 2002.

Earlier in the week, the Conference Board's consumer confidence index came in below expectations but traders focused on its overall rise, similar to the reaction to Friday's Michigan survey. Durable goods orders fell 2.4% in April, and March's gain was revised downward, but those numbers were dismissed as lagging indicators. Weekly jobless claims fell, but not as much as forecast and the four-week moving average remains well above 400,000. New- and existing-home sales data and an upward revision to first-quarter GDP were more clearly positive developments.

Back Street Boys

With the focus increasingly on stocks, other markets took a back seat this week. The yield on the benchmark 10-year Treasury rose 2 basis points to 3.36% (vs. its recent low of 3.29% on May 23), while gold futures dipped 0.9% to $365.60 per ounce. The dollar stabilized, rising to 119.37 yen late Friday vs. 116.89 a week ago. The euro set an all-time high above $1.19 intraday Tuesday but was at $1.177 late Friday vs. $1.183 a week ago.

The aforementioned consumer confidence and Chicago PMI reports, along with its technical oversold condition, contributed to the dollar's late-week recovery, "establishing the proverbial 'three-steps down two-steps up' pattern in the dollar's decline," according to Ashraf Laidi, chief currency analyst at MG Financial Group. Expectations of a rate cut next week from the European Central Bank -- which would lower the yield differential between the U.S. and Europe -- also helped the greenback.

"The immediate impact on the euro from a projected 50-basis-point rate cut is likely to be negative," Laidi suggested. "But a looming easing from the Federal Reserve later next month could re-establish the dollar's yield disadvantage."

Because a weaker dollar has been deemed "good" for stocks, any resultant euro strength might be another catalyst for the stock market's continued ascent.

How long can this "it's all good" environment last? Not much longer, according to Morgan's Bensignor, who is sticking with a medium-term target of 973 for the S&P 500. "The index could always have more to run, but we think that adding longs above 973 will be a very difficult game to play," he wrote.

Tune-In TaskMaster

I'll be back on WABC radio's Batchelor & Alexander show Friday night, around 9:30 p.m. PDT/12:35 a.m. EDT (i.e. Saturday morning for East Coasters.)

The show is nationally syndicated, so check wabcradio.com for local listings or Webcast options. And enjoy the weekend.

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.

More from Opinion

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks