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.

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