Stock Market Commentary for Thursday, April 21, 2005

So much for Tuesday's "recovery".  Actually, we haven't retraced the entire recovery, yet.  Pre-market trading caused a significant short-covering "rally" on Wednesday morning,  but simply led to "buying exhaustion" and the shorts in turn re-opened their short positions as soon as it became clear that the rally had run out of steam, which was barely a couple of minutes after the open.  This type of trading pattern happens, but there is no cosmic significance to this type of sell-off other than the predominance of traders and short-term speculators in the market.  True, long-term investors can ignore this type of volatility.

Although Nasdaq experienced an almost-sharp 18.60-point decline (-0.96%), it actually closed 32 points off its intra-day high, but that's more a measure of the degree of day trading and speculation than of "real" selling by true investors.  They call it "selling into the rally".

I always cringe when I see stock futures up sharply in the evening or before the open since it's usually a setup for precisely this kind of trading "action".

Sure, there's continued chattering about the supposed weakness of the economy, but that's mostly traders and speculators trying to incite short-term volatility that they can profit from rather than an indication of where the economy is headed over the next year or two.  A few zigs and zags here and there won't change the overall long-term picture for true investors.

Nasdaq trading volume was heavy (2.10 billion shares), and breadth was strongly negative, with 2.22 losers for each gainer.  This would have been a heavy sell-off, but the point decline was a little on the light side.

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-- Jack Krupansky