Stock Market Commentary for Wednesday, March 16, 2005

Once again, we're seeing mostly reactions by traders and short-term speculators based on technical considerations (e.g., very short-term momentum and support levels) rather that economic and business fundamentals or even necessarily real money flows. Nasdaq's moderately sharp 16.06-point decline was really simply a direct result of a lack of momentum after the recent run-up, nothing more. When momentum peters out, traders and short-term speculators will just keep pushing down on the market until enough real buying materializes to overwhelm them. Mutual fund inflows are weak enough that the bears can run for a few days before the inflow pressure overwhelms them.

An alleged "anthrax scare" may have spooked traders (who can get spooked by anything), but is not likely to have been a major cause of the decline.

Just to give you an idea about how silly the chatter can get, Briefing.com (usually a fairly reliable and respected source of commentary) erroneously reports that "confirmed cases of Anthrax are found at the Pentagon mail facility" when a) there haven't even been any "cases" reported or confirmed, but simply an initial reading, and b) there hasn't even been confirmation from the lab for the initial reading. They should be ashamed of themselves for such shoddy reporting. They did revise their reporting later in the day to refer to "confirmed reports" rather than "confirmed cases" and didn't even note that the definitive lab results weren't in yet, but the damage (if any) had already been done.

Meanwhile, beyond all the mindless chatter, the economic reports were fairly decent.

Nasdaq trading volume was moderate (1.85 billion shares), and breadth was moderately negative, with 1.68 losers for each gainer. Despite the disappointment, this was not a heavy sell-off.

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-- Jack Krupansky