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.

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