Stock Market Commentary for Wednesday, March 23, 2005

Although Fed talk about inflation was the nominal cause for the sell-off on Tuesday, with Nasdaq losing 18.17 points, we should note that volatility is quite common on Fed FOMC announcement days. In truth, there was nothing in the FOMC statement that is in any way inconsistent with anything that hasn't already been priced into the market many times over. What we saw on Tuesday was simply the typical momentum trading and speculation that occurs in a "thin" market with many players sitting on the sidelines waiting for the Fed to get out of the way.

Crazily, oil fell even as people talked about oil causing inflation.

Nasdaq closed barely above its low for the day, suggesting a "throw in the towel" capitulation, which is frequently what it takes to finally turn the corner from a sell-off to a new up-leg.

Nasdaq trading volume was moderate (1.87 billion shares), and breadth was moderately negative, with 1.57 losers for each gainer. This was not a heavy sell-off, despite the disappointing point decline.

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-- Jack Krupansky