Stock Market Commentary for Wednesday, April 13, 2005

People credited the minor rally on Tuesday to falling oil prices and the minutes of the last Fed FOMC meeting, but that's nonsense.  Those were simply excuses used by traders, speculators, pundits, and lazy journalists.  Trading on Tuesday was primarily technical in nature, with traders and speculators determined to artificially force Nasdaq to dip below its intra-day low of 1,968.58 from two weeks ago.  They tried very hard and almost got there (less that 2 points), but they in fact pushed too hard and there was no real selling pressure to back them up, so the market bounced back up in their faces.  The mere fact that they tried so hard and failed is itself a positive sign.

Although Nasdaq scored only a moderate 13.28-point gain, it in fact closed 35 points above its intra-day low.  That's quite a positive sign when the market was so close to falling through a key level of technical resistance.

The disappointing trade balance report was certainly a catalyst for negative sentiment, but there really wasn't anything totally unexpected there that hadn't already been priced into the market many times over.

The bottom line here for true investors:  steady as she goes.

Nasdaq trading volume was moderate, not quite heavy (1.93 billion shares), and breadth was moderately positive, with 1.21 losers for each gainer.  The market is still "fluttering", struggling to find its feet and get solidly onto a trend.

Economic Outlook: The economy is a bit murky right now, with some dramatic pockets of strength, but with some dramatic pockets of weakness as well.  Sure, the balance seems to be a reasonable net positive, but it's difficult to say how the strengths will hold up (e.g., housing, construction, internet, services, some technology companies) and how the weaknesses may further deteriorate (e.g., airlines, car companies, telecom, some technology companies).  We could see some dramatic fluctuations over the next few quarters, or for the next couple of years, for that matter, but the overall trajectory is indeed modestly upwards.  I remain optimistic, but significant volatility also remains a fact of life.

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-- Jack Krupansky