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.

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