Monday, February 28, 2005

Market Commentary for Tuesday, March 1, 2005

Despite the chatter about inflation, oil, "Mideast tensions", etc., the market decline on Monday was simply a technical "fluctuation" based on weak momentum. And when traders and speculators sense weakness in momentum, they reverse and work diligently to artificially push the market down, which has a snowball effect, especially as "technical support" is "broken" (which has nothing to do with economic or business fundamentals). There was no solid "reason" for the decline per se. The economic data was mixed, but still reasonably good.

The moderate 13.68-point Nasdaq decline was hardly more than profit-taking after the recent mini-recovery.

Nasdaq in fact bounced off its intra-day low shortly after 2:00 p.m., closing 14 points above that low, suggesting that either a big chunk of the earlier decline was due to good old-fashioned day-trading, or there actually was a heavy sell-off, but it was followed by a significant dip-buying rally. Take your pick, but neither is so bad for true long-term investors.

Nasdaq trading volume was heavy (2.16 billion shares), and breadth was moderately negative, with 1.40 losers for each gainer. This wasn't really a heavy sell-off, with only a moderate decline and only mediocre breadth.

Click here to read the entire column.

Sunday, February 27, 2005

Market Commentary for Monday, February 28, 2005

[The main column has been updated since Saturday.]

Friday was another one of those tentative trading sessions where people stand around wondering which way to play the market and then gradually an underlying trend becomes more apparent.  The market was almost flat and with a slightly negative tone until shortly after 11:00 a.m. when the rally took off and the tone began to change.  Nasdaq gained a moderate 13.70 points.  That seems like a nice gain, but volume was rather lean and sometimes we see rallies on Fridays that are driven primarily by short-term speculators who don't like to have open positions over the weekend.

The economic data was reasonably decent.

Here's a correction for Briefing.com's Market Update:  They wrote "The Nasdaq closed higher for the week but finished 23 points shy from a new 2005 high."  Make that about 85 points to the January closing high and about 110 points to the closing level of 2004, and about 125 points to the intra-day peak of 2005 (which was on the first day of the year).

It's worth noting that the one-month Nasdaq trend is now modestly positive (for a second day) for the first time this year.

Nasdaq trading volume was barely moderate (1.78 billion shares), and breadth was moderately positive, with 1.87 gainers for each loser.  This was not a strong rally, so we shouldn't take much comfort from the moderate gain.

Click here to read the entire column.

Saturday, February 26, 2005

Glossary of financial terms

The single best online glossary for financial terms has been produced by Duke University Professor Campbell R. Harvey (and his students). I would highly recommend it.

And if you run across a new term that is not in the glassary, please let me know and I'll contact Professor Harvey about adding a new entry.

In addition, we have our own web page which lists a wide variety of other finance glossaries, including print versions.

Friday, February 25, 2005

Market Commentary for Saturday, February 26, 2005

Friday was another one of those tentative trading sessions where people stand around wondering which way to play the market and then gradually an underlying trend becomes more apparent.  The market was almost flat and with a slightly negative tone until shortly after 11:00 a.m. when the rally took off and the tone began to change.  Nasdaq gained a moderate 13.70 points.  That seems like a nice gain, but volume was rather lean and sometimes we see rallies on Fridays that are driven primarily by short-term speculators who don't like to have open positions over the weekend.

The economic data was reasonably decent.

Here's a correction for Briefing.com's Market Update:  They wrote "The Nasdaq closed higher for the week but finished 23 points shy from a new 2005 high."  Make that about 85 points to the January closing high and about 110 points to the closing level of 2004, and about 125 points to the intra-day peak of 2005 (which was on the first day of the year).

It's worth noting that the one-month Nasdaq trend is now modestly positive (for a second day) for the first time this year.

Nasdaq trading volume was barely moderate (1.78 billion shares), and breadth was moderately positive, with 1.87 gainers for each loser.  This was not a strong rally, so we shouldn't take much comfort from the moderate gain.

Click here to read the entire column.

 

Thursday, February 24, 2005

Market Commentary for Friday, February 25, 2005

Thursday was yet another example of two disparate trading sessions tacked together in a single day. The market was choppy and lackluster and with a modestly negative tone until about 1:10 p.m. when it switched to rally mode and rose straight up into the close. Nasdaq had been down modestly, but closed up 20.45 points. Overall, this was merely a short-covering rally caused by the market being heavily oversold on a near-term technical basis and we should take no comfort from it until we see some true follow-through buying.

What happened? People were sitting around waiting for something, anything to happen and a subset of them lost patience and decided to cash out their short positions and switch to long positions. That kicked off a significant short-covering rally. There might have also been a little real buying or some program trading that kicked off the rally.

The 2,025 level provided decent technical support for Nasdaq. We did set a new intra-day low of 2,023.00 for the current potential up-leg, but the rally suggests that the recent mini-correction may in fact be over.

It's worth noting that the one-month Nasdaq trend is now positive (albeit barely) for the first time this year.

Nasdaq trading volume was heavy (2.06 billion shares), and breadth was moderately positive, with 1.57 gainers for each loser. This was almost a strong rally, but breadth was too mediocre.

Click here to read the entire column.

Wednesday, February 23, 2005

Market Commentary for Thursday, February 24, 2005

Wednesday was a classic in-between trading session as people were very undecided as to whether to continue betting on a decline, simply take some profits, or make an outright bet on a bounce. Nasdaq closed near flat, rising only 0.93 points, and on significant volatility. In fact, Nasdaq closed 8 points below its opening level, over 9 points below it's intra-day peak, and 7 points above its intra-day low. People sold into any attempts to rally, but they bought on the dips as well. They did everything but act decisively.

The fact that Nasdaq closed up but well below its opening level is a moderate yellow flag. In other words, we're not out of the woods yet.

The economic data was reasonably positive, but nothing toe get excited about, either way.

Nasdaq trading volume was barely moderate (1.77 billion shares), and breadth was modestly positive, with 1.13 losers for each gainer. This was a "treading water" session, with people playing both sides of the market, with no convincing momentum in either direction.

Click here to view the entire column.

Tuesday, February 22, 2005

Market Commentary for Wednesday, February 23, 2005

Although there was a fair amount of chatter about "reasons" for the steep market decline on Tuesday, most of those reasons were complete red herrings.  Even absent all those reasons, the market had run out of forward momentum and was vulnerable to attack based on technical considerations, as opposed to economic or business fundamentals.  Market sentiment was negative, so traders and speculators exploited that negativity.  The facts that oil was up and the dollar down and a little re-hashed discussion of central banks diversifying their foreign exchange reserves were true, certainly didn't justify some wholesale exodus from the market.  What we saw on Tuesday was simply the snowballing effect that can occur when momentum peters out and speculators itch to reverse and bet in the other direction.  Once the market starts breaking through "support" (a technical rather than economic or business concept), traders and speculators really start to pile on with their shorts and dumping of long positions.  The recent recovery off the January low really had run out of steam (with recent mutual fund inflows rather lackluster), so speculators simply no longer had any patience to wait for more buyers to show up.

The good news was that the sharp 28.30-point Nasdaq decline on Tuesday was a solid "throw in the towel" sell-off, so it has a good chance of having purged most of the "weak hands" out of the market.

The bad news is that we broke below the intra-day low of the new up-leg that started on Friday, February 11, so we're back to square one looking for the start of a new up-leg for the advance off the January low.

Nasdaq trading volume was heavy (2.07 billion shares), and breadth was strongly negative, with 2.68 losers for each gainer.  This was a heavy sell-off.

Click here to view the entire column.

 

Monday, February 21, 2005

Market Commentary for Tuesday, February 22, 2005

[There are a few changes since Saturday and Monday.]

After the sharp decline on Thursday, people are simply waiting for a solid indication that the Nasdaq sell-off has subsided. And since it was both a Friday and ahead of a three-day weekend, people were not anxious to stick their necks out. The very modest 2.72-point Nasdaq decline on Friday was essentially noise. The good news was that there was no continuation of the sell-off.

There was a lot of chatter about the "surge" in the Producer Price Index (PPI), but sensible people know that there is a lot of volatility and that a jump in tobacco prices is not cause for alarm.

People were still recovering from the Greenspan double-header on Wednesday and Thursday.

Nasdaq trading volume was light (1.61 billion shares), and breadth was moderately negative, with 1.27 losers for each gainer. This was another "treading water" session.

Click here for the full market commentary.

Sunday, February 20, 2005

Market Commentary for Monday, February 21, 2005

[There are a few changes since Saturday.]

After the sharp decline on Thursday, people are simply waiting for a solid indication that the Nasdaq sell-off has subsided. And since it was both a Friday and ahead of a three-day weekend, people were not anxious to stick their necks out. The very modest 2.72-point Nasdaq decline on Friday was essentially noise. The good news was that there was no continuation of the sell-off.

There was a lot of chatter about the "surge" in the Producer Price Index (PPI), but sensible people know that there is a lot of volatility and that a jump in tobacco prices is not cause for alarm.

People were still recovering from the Greenspan double-header on Wednesday and Thursday.

Nasdaq trading volume was light (1.61 billion shares), and breadth was moderately negative, with 1.27 losers for each gainer. This was another "treading water" session.

Click here for the full market commentary.

Saturday, February 19, 2005

I'm staying away from the stock market because...

So, what' YOUR pet excuse for staying away from the stock market?

After all, how much risk is there with putting a little money in an S&P 500 index fund?

Let's hear it, either here on the blog, or via email.

Friday, February 18, 2005

Market Commentary for Saturday, February 19, 2005

After the sharp decline on Thursday, people are simply waiting for a solid indication that the Nasdaq sell-off has subsided. And since it was both a Friday and ahead of a three-day weekend, people were not anxious to stick their necks out. The very modest 2.72-point Nasdaq decline on Friday was essentially noise. The good news was that there was no continuation of the sell-off.

There was a lot of chatter about the "surge" in the Producer Price Index (PPI), but sensible people know that there is a lot of volatility and that a jump in tobacco prices is not cause for alarm.

People were still recovering from the Greenspan double-header on Wednesday and Thursday.

Nasdaq trading volume was light (1.61 billion shares), and breadth was moderately negative, with 1.27 losers for each gainer. This was another "treading water" session.

Click here for the full market commentary.

Market Commentary for Friday, February 18, 2005

The sharp 26.09-point Nasdaq decline on Thursday was primarily technical in nature, more the result of a petering out of momentum after last Friday's sharp gain than the result of economic or business fundamentals. People were still on Greenspan Watch, which keeps a lot of people out of the market.

The good news is that Nasdaq fell without any significant attempt to rally (only 9 points above the mid-morning low), what is known as a "throw in the towel" sell-off, and suggesting a near-term selling capitulation. The reason this is good news is that a lot of naive speculators may have gotten sucked into the sell-off, but will be excellent candidates for a significant short-covering rally in the coming days since those amateurs don't have a very high tolerance for pain (losses as the market snaps back).

The economic data was mixed, hinting at an economy that will be continuing to recover, but still not fully up to normal cruising speed.

Nasdaq trading volume was moderate, almost heavy (1.95 billion shares), and breadth was strongly negative, with 2.11 losers for each gainer. This was almost a heavy sell-off, but volume was still a little light.

Click here for the full column.

Daily Stock Market Perspective

We post a daily stock market perspective every evening (except Saturday).

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