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.

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