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.

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-- Jack Krupansky