By: Thomas H. Kee Jr.

Editor, Stock Traders Daily

(La Jolla, CA) The Market began to surge early Monday morning as investors digested last week's decline.  Corporate Investment Banking activity has spurred this rally, but it extends beyond those to include economically sensitive sectors like REITs, Information Technology, and Networking and communication.

Xerox (NYSE: XRX) announced plans to acquire Affiliated Computer for $6.6 Billion, and Abbot (NYSE: ABT) agreed to acquire the pharmaceutical business of Belgian chemicals maker Solvay for $6.6.  Those multi-billion dollar deals are exactly what the Market has been looking for to confirm the increases from the March lows.

Although the bounce from the March lows to current levels was extreme, Wall Street considers today's investment banking activity to be a very good sign.  If a recovery is underway, if the recession is truly over, mergers and acquisitions are a necessary byproduct. 

From there, the positive bias rolled over to other sectors.  REITs have been strong.  LaSalle (NYSE: LHO) and Host Properties (NYSE: HST) each have performed well thus far today.  These are Hotel REITs, and they are dependent on the economy to perform well.  Think back eight months.  Business travel and leisure travel had all been dried up.  Now the travel bug is coming back, and businesses are more comfortable with the added expense associated with face to face meetings again.

Then, we have the sector that lead the rally from March, Technology.  Cisco systems (NASDAQ: CSCO) and Juniper Networks (NASDAQ: JNPR) are standouts.  Thus far, everything seems to be participating, and everyone is giddy.

The Risks.

However, risks are no different this week than they were last week.  The only difference is, the Market ended last week testing support, and this week is bounced from that support level.  Stock Traders Daily identified support as 2090 in the NASDAQ.  That level was successfully tested Friday, and it needed to hold for a bounce to occur.  Thus far it has, but there is more to do.  Resistance is clear too, and it needs to be respected.

Risk controls need to be in place, and upside targets must be considered.  Do not enter this rally blind to those risks, or to the profit taking signals that will come.