Stock Market Commentary for Friday, April 1, 2005

People blamed Nasdaq's modest 6.44 point decline on rising oil prices, but that's just a silly excuse. Nasdaq lost a little simply due to traditional profit-taking after a significant short-covering rally on Wednesday.

The economic data was reasonably good, although still a little mixed.

One relevant excuse for selling on Thursday (or alternatively that may have limited selling) was to hedge in advance of Friday's big employment report. It's a mixed bag, with unemployment claims up lately (but too late to affect the report whose cut-off date is the 12th of the month), but the Chicago PMI report showing the pace of manufacturing employment at its fastest pace since 1983. How all of this will balance out is anybody's guess, other that to say that the longer-term trend is a gradual drift upwards.

The latest weekly report on mutual fund money flows showed another modest inflow for the ninth consecutive week. These meager flows are not nearly enough to counter significant volatility caused by deep-pocket short-term speculators, but will continue to exert a gradual upwards force on the market over the longer term.

Nasdaq trading volume was moderate (1.84 billion shares), and breadth was slightly negative, with 1.02 losers for each gainer. A modest decline on near-neutral breadth suggests that smaller-cap stocks performed better than larger-cap stocks, which is consistent with the latest weekly report on mutual fund money flows.

Click here to read the entire column.

-- Jack Krupansky

Quick stock quotes and charts in Google search

Here's a cool new feature of Google: Just type a ticker symbol into the Google search box and Google will display the stock price and chart.

For example, here's the quote and chart for the S&P 500 Tech Sector Spider (XLK).

-- Jack Krupansky

Stock Market Commentary for Thursday, March 31, 200

Bummer... Nasdaq rising 31.79 points (1.61%) certainly looks great, but trading volume was just barely moderate, suggesting that that this was not a rock-solid rally, and was more likely a classic "dead-cat bounce". I'm sure there was a modest amount of real buying to get the rally going and keep it going, but the bulk of the low-volume gain was most certainly short-covering, plus some momentum buying. I'll take the gain, but I'll want to see some serious follow-through before celebrating too wildly.

Some people say that the rally was based on falling oil prices, but the real reason was that the market was in fact heavily oversold on a short-term technical basis and a sharp short-covering bounce was due at any time. Besides, oil prices recovered late in the day anyway.

It does now appear that the sell-off on Tuesday may have been the "capitulation" of the correction off the March 7 peak.

Nasdaq trading volume was barely moderate (1.76 billion shares), and breadth was strongly positive, with 2.24 gainers for each loser. Despite the nice gain, volume was too light to consider this a strong rally.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Wednesday, March 30, 2005

The short-term market remains in control of traders and short-term speculators who will sell simply because they sense a lack of near-term momentum. This state of affairs will exist as long as mutual money flows are as weak as they've been for the past few months. Occasionally speculators will look at their charts and reverse course, bouncing the market with a range. Presently, they're testing the bottom of the current range to see how much "support" exists.

The economy continues to plug along, recovering at a modest pace, so true investors need not worry about these volatile swings.

Nasdaq trading volume was moderate (1.84 billion shares), and breadth was very strongly negative, with 2.71 losers for each gainer. Despite the disappointing point-loss, this was not a heavy sell-off. It was the kind of volatile sell-off that can be expected when trading volume is relatively light.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Tuesday, March 29, 2005

There may have been a little real buying to keep the market in positive territory on Monday, but most of the intra-day euphoria was simply day trading, short-covering, and the kind of volatility you frequently see when trading volume is light. I suspect that a fair number of people are taking an extended weekend break (ala Spring break).

Although Nasdaq's 1.46-point gain is at least better than a continuation of the recent sell-off, the fact that Nasdaq closed six points below its opening level and thirteen points below its intra-day peak tell us that there is still a fair amount of "sell into any rally" sentiment out there.

As I've noted recently, we can expect that the market will continue to trade mostly due to "technical" concerns for some time, basically until mutual fund money flows do something radically different than their very slow drift upwards.

Nasdaq trading volume was very light (1.541 billion shares), and breadth was modestly negative, with 1.18 losers for each gainer. The Nasdaq-100 Tracking Stock (QQQQ) and S&P 500 Tech Sector "Spider" (XLK) were both up slightly more than Nasdaq, suggesting that the weakness was due to smaller-cap stocks. A Nasdaq gain on negative breadth also points towards weakness in smaller-cap stocks. I would note that smaller-cap stocks are the domain of hard-core speculators, so the market may be healthier than it superficially appears.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Monday, March 28, 2005

[The main column has been updated slightly since Friday.]

Thursday was another useless trading session, possibly due to the imminent long holiday weekend with the market closed on Friday. The nice pop in the morning and early afternoon was simply a combination of day trading and short-covering. The evaporation of the early gains late in the day was a combination of the day traders closing out their positions and the annoyed shorts who had covered their positions earlier but re-opened them when it became clear that the rally had run out of steam.

The bad news is that Nasdaq closed six points below its opening level, suggesting that some "sell into any rally" sentiment is still dogging us. That's a modest yellow flag. On the other hand, the early rally was due to traders playing around and causing a little short-squeeze, and volume was light, so we can probably ignore the whole day.

The good news is that there was no sign of a continuation of the recent sell-off.

The economic data was reasonably positive, although somewhat mixed.

There's a good chance that the recent sell-off is over, but we can't bet on it, yet.

Nasdaq trading volume was light (1.71 billion shares), and breadth was modestly positive, with 1.16 gainers for each loser. The Nasdaq-100 Tracking Stock (QQQQ) and S&P 500 Tech Sector "Spider" (XLK) were both up slightly as well.

Click here to read the entire column.

-- Jack Krupansky

Warren Buffett, Berkshire-Hathaway, and a higher standard

I just read a post on Dan Gillmor's blog entitled "The Wrong Standard", which talked a little about accounting scandals, Wall Street, and Warren Buffet and Berhshire Hathaway. I immediately comented on my own reactions to his post and I re-blog those comments below since I think they are too important to be lost in someone else's blog...

I agree with the gist of your comments on Warren Buffett, but I really do think that he needs to go the extra mile here, especially since he really is one of the "last men standing" that true investors can have at least a little faith in.

The reason he (and all you shareholders, including my mother) got in trouble with General Re is a failure of due diligence and a failure to hold the acquisition to the same high standards he's had with past acquisiitons. General Re has been nothing but bad news to B-H shareholders (and I WAS one, and many GR shareholders were misguidedly turned into B-H share-flippers) since the get-go. AT least we can credit Warren with being honest about each of GR's problems as they've come out.

To go the extra mile... Warren needs to focus on true investment (for the long-term) rather than playing the "trading" game with silver, treasury shuffling, foreign exchange, commodities, etc. He also needs to further streamline and simplify B-H so that even simple-minded shareholders can make sense of every aspect of the company finances.

A good start would be for B-H to spinoff GR so that market forces can force GR to reform itself and restructure itself away from "rocket science" financial engineering.

As far as Barron's and the Wall Street Journal, make no mistake, if you're a true investor (for the long-term), those two rags ARE THE ENEMY. Neither is focused on truth or enlightenment of the investor, but at best offering grist for short-term trading. I used to read both, both 98% of their value can be gotten from web-based sources. The other 2% of their value simply isn't worth the moral bankruptcy of "feeding the crocodile".

With the internet, the web, blogging, and grassroots activist citizen-journalists, what possible value do Barron's and WSJ [...] have to offer those of us who are not Wall Street insiders? And why do any of us need to tolerate the undue and unfair influence that "The Journal" has insinuated in our society, especially in matters of national public policy, especially beyond even strictly financial matters?

I do believe that Warren Buffett CAN come through for us (citizens, even if not investors), but only to the extent that he further distances himself from the kind of "Old Wall Street" that is unfortunately epitomized by Barron's and the Wall Street Journal.

I did leave out one statement... when I referred to Barron's and the Wall Street Journal as "the enemy", I meant to also say that on that score "either you're with us, or you're against us." I really do so them as the enemy of true investors. And I do see Warren Buffett as one of our best hopes to clean out that financial sewer called "Wall Street".

-- Jack Krupansky

Stock Market Commentary for Friday, March 25, 2005

Thursday was another useless trading session, possibly due to the imminent long holiday weekend with the market closed on Friday. The nice pop in the morning and early afternoon was simply a combination of day trading and short-covering. The evaporation of the early gains late in the day was a combination of the day traders closing out their positions and the annoyed shorts who had covered their positions earlier but re-opened them when it became clear that the rally had run out of steam.

The bad news is that Nasdaq closed six points below its opening level, suggesting that some "sell into any rally" sentiment is still dogging us. That's a modest yellow flag. On the other hand, the early rally was due to traders playing around and causing a little short-squeeze, and volume was light, so we can probably ignore the whole day.

The good news is that there was no sign of a continuation of the recent sell-off.

The economic data was reasonably positive, although somewhat mixed.

There's a good chance that the recent sell-off is over, but we can't bet on it, yet.

Nasdaq trading volume was light (1.71 billion shares), and breadth was modestly positive, with 1.16 gainers for each loser. The Nasdaq-100 Tracking Stock (QQQQ) and S&P 500 Tech Sector "Spider" (XLK) were both up slightly as well.

Click here to read the entire column.

-- Jack Krupansky

Stock market holidays

Here is the schedule of stock market holidays.

Good Friday is in fact a market holiday.

Memorial Day is the next market holiday.

-- Jack Krupansky

Getting started with stock market investment

We have a web page dedicated to the topic of "Getting Started with Stock Market Investment." It's not designed to be a PhD program for geniuses with a lot of money, but a gentle and honest introduction for simple people who want to dip their toe in the market waters without a lot of studying and without the risk of losing their shirt.

Just a reminder, that our main web site is at www.Finaxyz.com.

-- Jack Krupansky

Stock Market Commentary for Thursday, March 24, 2005

The volatility and very meager Nasdaq gain of only 0.88 points on Wednesday illustrate the unpredictability that occurs when the market is struggling to decide whether a sell-off is simply pausing or about to turn into a recovery. Much of the weakness stemmed from the fact that the market takes a couple of days to recover from any Fed FOMC announcement.

Nasdaq actually closed 5 points above its opening level, which is a positive sign.

Nasdaq trading volume was barely moderate (1.80 billion shares), and breadth was almost strongly negative, with 1.96 losers for each gainer. The Nasdaq-100 Tracking Stock (QQQQ) and S&P 500 Tech Sector "Spider" (XLK) were both up moderately, suggesting that the Nasdaq decline was primarily due to selling of smaller-cap stocks. The significantly negative market breadth confirms that focus on selling of smaller-cap stocks.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Wednesday, March 23, 2005

Although Fed talk about inflation was the nominal cause for the sell-off on Tuesday, with Nasdaq losing 18.17 points, we should note that volatility is quite common on Fed FOMC announcement days. In truth, there was nothing in the FOMC statement that is in any way inconsistent with anything that hasn't already been priced into the market many times over. What we saw on Tuesday was simply the typical momentum trading and speculation that occurs in a "thin" market with many players sitting on the sidelines waiting for the Fed to get out of the way.

Crazily, oil fell even as people talked about oil causing inflation.

Nasdaq closed barely above its low for the day, suggesting a "throw in the towel" capitulation, which is frequently what it takes to finally turn the corner from a sell-off to a new up-leg.

Nasdaq trading volume was moderate (1.87 billion shares), and breadth was moderately negative, with 1.57 losers for each gainer. This was not a heavy sell-off, despite the disappointing point decline.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Tuesday, March 22, 2005

Traders made a semi-serious attempt to artificially push Nasdaq down on Monday, and they in fact succeeded, briefly, but since they pushed too hard too quickly the market bounced back in their faces, with Nasdaq closing down a mere -0.28 points. We're not out of the woods yet, but the weakness of the sell-off is good news.

Nasdaq closed 14 points above it's intra-day low. That's a positive sign.

The bottom line here is that traders and short-term speculators are trying very hard to artificially depress the market. They can succeed at that game for short periods of time or for short market swings, but eventually net mutual fund money flows will force the market back to its true longer-term trend.

Nasdaq trading volume was light (1.65 billion shares), and breadth was moderately negative, with 1.17 losers for each gainer. The Nasdaq-100 Tracking Stock (QQQQ) was actually up modestly, suggesting that this was basically a sell-off of smaller-cap stocks. The S&P 500 Tech Sector "Spider" (XLK) was flat, further suggesting that the weakness was in smaller-cap stocks.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Monday, March 21, 2005

Nasdaq drifted downwards modestly on Friday (by 8.63 points) and did indeed set a new intra-day low for 2005 of 1,999.98. Momentum had weakened noticeably recently, so it's not much of a surprise. No panic ensued, and Nasdaq even recovered modestly (by almost 8 points), suggesting that there really wasn't any conviction to the sell-off and that it was probably more technical in nature rather than based on economic or business fundamentals and it wasn't based on mutual fund money flows since we've had modest inflows for seven consecutive weeks now.

Traders and short-term speculators can artificially push the market up or down by 100 to 200 points on a whim, so we need to accept this level of volatility as simply a part of the way the market works.

Despite the chatter, oil prices are not really a big factor for the market. The price of oil is a significantly less significant factor for most companies than in past decades. The really good news is that fuel prices may finally force the hands of the airlines so that we finally see some more dramatic progress on the restructuring front. We need to see two or three of the major air carriers completely eliminated. The car companies will be impacted as well, and they need to hasten their restructuring efforts as well.

Nasdaq trading volume was very heavy (2.26 billion shares), and breadth was moderately negative, with 1.54 losers for each gainer. This wasn't a heavy sell-off, but the very heavy volume was a bit disturbing. A modest decline on heavy volume with only moderately negative breadth suggests a somewhat rip-tide market with quite a few people buying on the dip even as a modestly greater number of people were bailing out.

Click here to read the entire column.

-- Jack Krupansky

CBOE announces options on VIX

The Chicago Board Options Exchange (CBOE) announced today that options on the CBOE Volatility Index, VIX, (ticker symbol VXB) will begin trading on Friday, April 22, 2005.

VIX is commonly referred to as the market's "fear gauge."

Futures on the CBOE Volatility Index (ticker symbol VX) were launched a year ago and trade on the CBOE Futures Exchange (CFE).

VIX is derived from real-time S&P 500 Index option prices and designed to reflect investors' consensus view of expected stock market volatility over the next 30 days. This is known as "implied volatility", referring to the future, as opposed to simple volatility which is "historical volatility" and a measure of past, actual volatility.

VIX is considered the "investor fear gauge" since during the market declines that typically accompany times of financial stress, investors buy portfolio protection in the form of index options. Conversely, demand for those options falls as the market rises and investors feel less urgent need for "insurance".

VIX is essentially a measure of the demand for those index options. Greater demand results in a higher VIX and lower demand results in a lower VIX.

Read the press release.

-- Jack Krupansky

Gone fishing

I'll be attending a conference all weekend, so I probably won't be able to post a column for either Saturday or Monday. My apologies.

-- Jack Krupansky

Stock Market Commentary for Friday, March 18, 2005

Thursday was a classic in-between day or "rip-tide" market which bounced around wildly with little net change. This happens frequently after a significant sell-off. Market sentiment was still fairly negative, but the downwards momentum had petered out and the shorts were split between taking profits after their nice run (down) or pushing the market down harder to get a full break-down.

Nasdaq teetered very modestly above the intra-day low for 2005, but valiantly hung in their and even bounced a little (by a mere 0.67 points). With all the recent negative sentiment it's actually surprising that Nasdaq didn't crumble. This strongly suggests that a fair amount of the recent downwards move really was simple a technical "swing", and that short-term speculators really are bumping into the fact that enough stock mutual fund money has trickled into the market to keep the market from sinking ($318 million in the past week and a very modestly positive flow for seven consecutive weeks). Traders and short-term speculators can indeed push the market around wildly on merely a whim, but the longer-term money flows ultimately determine the long-term trend.

After hitting its intra-day low shortly after 10:00 a.m., Nasdaq actually recovered for the rest of the day, closing six points above the morning low. These are reasonably good signs given the recent "carnage".

Meanwhile, beyond all the mindless chatter, the economic reports were for the most part fairly decent.

Nasdaq trading volume was barely moderate (1.77 billion shares), and breadth was very slightly negative, with 1.003 losers for each gainer.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Thursday, March 17, 2005

A big 2005 profit warning from General Motors (GM) was certainly a negative catalyst on Wednesday, but the overall market reaction was still more technical in nature. The current account deficit was another negative and does get a lot of attention, but it's also something will incrementally fix itself over the next few years as the economy continues to restructure. Another spike in the price of crude oil was also given as a catalyst, but there was nothing new or unexpected there, with the spike being driven primarily by rampant speculation, especially since the latest weekly report showed yet another rise in crude oil inventory levels.

Nasdaq had already been on the verge of a technical break down, so it's no surprise that even a couple of modestly negative catalysts managed to push it over the edge. The almost sharp 19.23-point decline for Nasdaq was certainly disheartening, but hardly a very big deal.
Meanwhile, beyond all the mindless chatter, the economic reports were for the most part fairly decent.

Nasdaq trading volume was moderate, almost heavy (1.99 billion shares), and breadth was moderately strongly negative, with 1.81 losers for each gainer. Despite the disappointment, this was still not a heavy sell-off.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Wednesday, March 16, 2005

Once again, we're seeing mostly reactions by traders and short-term speculators based on technical considerations (e.g., very short-term momentum and support levels) rather that economic and business fundamentals or even necessarily real money flows. Nasdaq's moderately sharp 16.06-point decline was really simply a direct result of a lack of momentum after the recent run-up, nothing more. When momentum peters out, traders and short-term speculators will just keep pushing down on the market until enough real buying materializes to overwhelm them. Mutual fund inflows are weak enough that the bears can run for a few days before the inflow pressure overwhelms them.

An alleged "anthrax scare" may have spooked traders (who can get spooked by anything), but is not likely to have been a major cause of the decline.

Just to give you an idea about how silly the chatter can get, Briefing.com (usually a fairly reliable and respected source of commentary) erroneously reports that "confirmed cases of Anthrax are found at the Pentagon mail facility" when a) there haven't even been any "cases" reported or confirmed, but simply an initial reading, and b) there hasn't even been confirmation from the lab for the initial reading. They should be ashamed of themselves for such shoddy reporting. They did revise their reporting later in the day to refer to "confirmed reports" rather than "confirmed cases" and didn't even note that the definitive lab results weren't in yet, but the damage (if any) had already been done.

Meanwhile, beyond all the mindless chatter, the economic reports were fairly decent.

Nasdaq trading volume was moderate (1.85 billion shares), and breadth was moderately negative, with 1.68 losers for each gainer. Despite the disappointment, this was not a heavy sell-off.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Tuesday, March 15, 2005

The market flopped around on Monday trying to find its feet, and did actually bounce a little, but not with any real conviction. Sensing weak momentum, traders tried too hard to push the market down and it simply popped back up in their faces, with a moderate gain of 9.44 points for Nasdaq. There was nothing significant going on, simply day trading and speculators focusing on technical indicators. The good news is that Nasdaq bounced back so nicely. The bad news was that trading volume was far too light for this mini-rally to mean very much.

The weakness of the bounce is a moderate yellow flag.

The Nasdaq 2,040 level seems to be offering a reasonable level of technical support.

Nasdaq trading volume was light (1.73 billion shares), and breadth was modestly positive, with 1.14 gainers for each loser. This was a very quiet day.

Click here to read the entire column.

-- Jack Krupansky

Stock Market Commentary for Monday, March 14, 2005

[The main column has been updated since Saturday.]

The market decline on Friday was once again due primarily to technical considerations (weak momentum and technical support levels), and not due to "renewed inflation fears", the price of oil, higher interest rates, or any of the other chattering that traders and speculators use to try to artificially incite extra volatility in the market. Nasdaq's moderately sharp 18.12-point decline was not a negative response to any news, but a simply a technical reaction to the fact that there was no significant momentum even with good news from Intel (INTC).

Mutual fund inflows continue at a weak level, so the market will have a modest drift higher, but with these moderate downward spasms along the way. They can certainly be disquieting, but can safely be ignored by true investors.

The economy is in fairly decent shape, despite the chattering.

Nasdaq trading volume was moderate (1.80 billion shares), and breadth was moderately negative, with 1.21 losers for each gainer. Sure, this was a disappointing sell-off, but it wasn't very heavy at all.

Click here to read the entire column.

Supercharged commodities speculation

A Reuters article entitled "Funds Get Physical in Commodities Boom" gives an excellent summary of the extent to which rising commodity prices are due to speculation by hedge funds, but now by more conservative pension, insurance, and endowment funds as well. And I would imagine the big banks are in on it as well. Some funds are even taking physical delivery of commodities and holding to sell at higher prices in the future. This is all consistent with what I have been saying all along about speculation rather than demand or shortages pushing prices higher, but the extent of speculation by the non-hedge funds is quite an eye-opener.

None of this changes my overall view, but I may have to extend my horizon for this commodities speculation "bubble". How far to extend it will depend on how long the non-hedge funds have been in the game and how many are still standing in line waiting to get in. For all I know, the game may already be over and all the big players are already in and now looking to attract a large amateur audience to whom they can dump their positions to get out. After all, if it was such a sure thing, why would they be willing to let any outsiders into the game? It certainly sounds like an end-game maneuver. That said, I'd venture that "the party" could run anywhere from another two to twenty months.

The people quoted in the article, and obviously willing to be publicly quoted, included the commodities business development manager at ABN-Amro, a managing director at Goldman Sachs, the head of Commodities Research at Deutsche Bank, someone at Barclays Capital, someone at SG Commodities, and principal of hedge fund Premia Capital Management.

The only voice of reason in the whole article was John Kemp of Sempra Metals Ltd. who noted that "These markets are too small and illiquid to handle the amount of money that the investment community is pouring in .... It could go on for another six months, but the longer it goes on the harder the crash."

Stock Market Commentary for Saturday, March 12, 2005

The market decline on Friday was once again due primarily to technical considerations (weak momentum and technical support levels), and not due to "renewed inflation fears", the price of oil, higher interest rates, or any of the other chattering that traders and speculators use to try to artificially incite extra volatility in the market. Nasdaq's moderately sharp 18.12-point decline was not a negative response to any news, but a simply a technical reaction to the fact that there was no significant momentum even with good news from Intel (INTC).

Mutual fund inflows continue at a weak level, so the market will have a modest drift higher, but with these moderate downward spasms along the way. They can certainly be disquieting, but can safely be ignored by true investors.

The economy is in fairly decent shape, despite the chattering.

Nasdaq trading volume was moderate (1.80 billion shares), and breadth was moderately negative, with 1.21 losers for each gainer. Sure, this was a disappointing sell-off, but it wasn't very heavy at all.

Click here to read the entire column.

Stock Market Commentary for Friday, March 11, 2005

Thursday was another one of those split days for Nasdaq, with a steep drop of 19 points to the intra-day low shortly after 11:00 a.m., followed by a gradual recovery for the rest of the day, closing down a mere 1.57 points. Both the decline and the recovery were both driven strictly by technical considerations, devoid of any economic or business fundamentals, despite the chatter about oil or inflation or whatever. Traders and speculators sensed a weakness of momentum at the open, made their move and piled on, but they pushed the market down too far and too fast, causing it to bounce back in their faces.

If the sky really were falling, Nasdaq would have fallen by a little more that 2 points. The chatterers do their jobs quite well, but they should nonetheless be ignored by true investors.

Nasdaq trading volume was moderate (1.84 billion shares), and breadth was moderately negative, with 1.46 losers for each gainer. The very modest decline coupled with moderately negative breadth suggests that people were dumping smaller-cap stocks in favor of keeping or buying larger-cap stocks. In fact, my S&P 500 Tech Sector Spider (XLK) which consists of larger-cap tech stocks rose by 0.45% on Thursday.

Click here to read the entire column.

Stock Market Commentary for Thursday, March 10, 2005

Once again, we see a market decline that was driven primarily by technical trading concerns (loss of momentum and falling through technical support) rather than any significant economic or business fundamentals. Sure, high oil prices are a great way to spook short-term traders, but serious investors are able to sense that when the weekly oil inventory report shows a significant rise in supply, there is no economic fundamental reason for oil prices to move higher. As the Fed told us on Wednesday, the economy is doing fine.

Nasdaq's moderate 12.26-point decline was merely another minor bout of profit-taking. If the sky really were falling the decline would have been somewhat steeper.

The volatility that we've seen lately is simply a side effect of the fact that equity mutual fund inflows have been rather modest lately. That means that we see some nice up days and then some disappointing down days, but the underlying trend has been to drift upwards despite all the volatility.

Nasdaq trading volume was moderate (1.91 billion shares), and breadth was almost strongly negative, with 1.97 losers for each gainer. This still was not a heavy sell-off, but simply momentum traders and speculators pushing the market down as real buying (and short-covering) had petered out.

Click here to read the entire column.

Stock Market Commentary for Wednesday, March 9, 2005

Nasdaq's moderately sharp 16.66-point decline on Tuesday was variously blamed on Texas Instruments (TXN), oil prices, gasoline prices, the plunging dollar, inflation anxiety, etc., but that's a nonsensical analysis. The real reason for the decline is simply that Monday's rally was on shaky ground (my yellow flags from Monday) and real buying momentum simply wasn't there, causing traders and short-term speculators to reverse and intentionally seek to push the market down as a technical response having nothing to do with economic or business fundamentals. This was the precise flip side of Monday's rally which wasn't based on economic or business fundamentals either. The big picture for economic and business fundamentals did not change overnight.

The bottom line: no big deal. True investors should remain patient.

Nasdaq trading volume was light (1.71 billion shares), and breadth was not quite strongly negative, with 1.88 losers for each gainer. This was not a heavy sell-off, but simply momentum traders reversing and pushing the market down as real buying (and short-covering) had petered out.

Click here to read the entire column.

Stock Market Commentary for Tuesday, March 8, 2005

It started to look like a decent rally on Monday, but it was too fragile and really didn't take off. There may have been a little real buying to give the market some initial lift, and that probably caused a short-covering rally that in turn snowballed, but only moderately. There was probably some significant chatter about further rallying in the coming days, which probably kept the short sellers out of the Nasdaq game at the end of the day, but may have encouraged them to put a little downwards pressure on the Dow while they want for Nasdaq to peter out (or so they think).

Nasdaq's almost-sharp 19.60-point gain (+0.95%) was almost impressive, but not quite.

Nasdaq just barely peeked over the psychological 2,100 level, but the feebleness of that attempt (2,100.57) simply caused traders to reverse and try to push the market back down. Nasdaq closed 10 points off the intra-day peak. That warrants at least a modest yellow flag.

Nasdaq trading volume was almost heavy (1.97 billion shares), but breadth was actually slightly negative, with 1.04 losers for each gainer. Not only was this a weak rally, but the negative breadth suggests significant selling of smaller-cap stocks (the larger-caps have an outsize influence on the point-change). This is definitely not the kind of rally that we can take any comfort from. I would say that it rates a clear yellow flag.

Click here to read the entire column.

Stock Market Commentary for Monday, March 7, 2005

[The main column has been updated since Saturday.]

The market responded reasonably well to a reasonable employment report on Friday. Nasdaq scored only a moderate 12.21-point gain, but the employment report wasn't that exciting anyway.

Nasdaq actually closed a half-point below it's opening level, and almost 8 points off it's intra-day peak, suggesting that there is still quite a bit of "sell into any rally" sentiment out there. That's a moderate yellow flag. In fact, Nasdaq may have gained for the day solely due to short-term speculators closing short positions ahead of the weekend, or possibly because they had misguidedly bet on a weaker employment report.

Nasdaq trading volume was moderate (1.84 billion shares), and breadth was moderately positive, with 1.36 gainers for each loser. This was a rather weak rally, not something that we should draw much comfort from.

Click here to read the entire column.

Stock Market Commentary for Saturday, March 5, 2005

The market responded reasonably well to a reasonable employment report on Friday. Nasdaq scored only a moderate 12.21-point gain, but the employment report wasn't that exciting anyway.

Nasdaq actually closed a half-point below it's opening level, and almost 8 points off it's intra-day peak, suggesting that there is still quite a bit of "sell into any rally" sentiment out there. That's a moderate yellow flag. In fact, Nasdaq may have gained for the day solely due to short-term speculators closing short positions ahead of the weekend, or possibly because they had misguidedly bet on a weaker employment report.

Nasdaq trading volume was moderate (1.84 billion shares), and breadth was moderately positive, with 1.36 gainers for each loser. This was a rather weak rally, not something that we should draw much comfort from.

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Stock Market Commentary for Friday, March 4, 2005

Since momentum has petered out, partially due to weaker mutual fund inflows, there was additional profit-taking after the recent run-up. People were anxious about the big employment report coming out this morning. There was some negative analyst commentary that may have spooked tech stocks, but you can ignore that kind of noise.

The good news is that despite a moderate 9.10-point decline on Thursday, Nasdaq did manage to close 10 points above it's low for the day. That tells us that despite the exit of some momentum traders, there is actually some new money coming into the market.

The economic data was reasonably decent.

Nasdaq trading volume was moderate (1.92 billion shares), and breadth was modestly negative, with 1.13 losers for each gainer. This was not a strong sell-off, but simply the kind of evaporation that occurs whenever momentum peters out.

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Stock Market Commentary for Thursday, March 3, 2005

The modest 3.75-point Nasdaq decline on Wednesday was due to a combination of profit-taking after Tuesday's rally, and a little anxiety while people wanted for Greenspan to testify before Congress and some more anxiety while people are waiting for the "big" employment report on Friday. No big deal.

The good new is that despite the decline, Nasdaq actually closed modestly above its opening level (by 7 points) and moderately above its intra-day low (by 10 points). Those are good signs. Traders and short-term speculators made a diligent effort to push the market down, but it bounced back.

The bad news is that Nasdaq closed 17 points below it's intra-day peak. That's a moderate yellow flag, but probably not so bad since it may have been simply caused by nervous short-covering after the initial strong bounce after the morning low.

Nasdaq trading volume was heavy (2.03 billion shares), and breadth was moderately negative, with 1.29 losers for each gainer. We're in a rip-tide trading market again, with the two warring camps almost equally balanced between those pushing for people to get out of the market and those believing on getting deeper into the market. I lean a little towards the latter camp.

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Market Commentary for Wednesday, March 2, 2005

The nice little market "pop" on Tuesday was simply the flip side of the decline on Monday. Nothing has really changed as far as economic or business fundamentals, so both days can be chalked up to "technical fluctuations". Overall, the market is still in "drift" mode, especially as people are anxious and uncertain about Friday's employment report.

Nasdaq trading volume was moderate (1.94 billion shares), and breadth was moderately positive, with 1.50 gainers for each loser. This was not a strong rally. The gain was nice, but not particularly impressive, and volume and breadth were so-so. This was simply a recovery from the negative sentiment that was artificially pumped into the market on Monday.

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