Stock Market Commentary for Friday, May 27, 2005

Although an upwards revision to the Q1 GDP report was a nominal reason for the market bounce on Thursday, the rally was still more of a technical response than based on true economic or business fundamentals. After all, the GDP number came in close to expectations, so there was no unsurprising news to respond to.

There were probably a number of bears who jumped on the corrective bandwagon on Wednesday and then had to furiously cover their short positions after Wednesday's decline turned out to be simply some modest profit-taking.

Nasdaq's barely sharp 21.07-point gain on Thursday was quite welcome, but the rather skimpy trading volume tells us to tread carefully and not take this rally for granted.

The economic news was so-so.

Nasdaq trading volume was rather light (1.66 billion shares), and breadth was strongly positive, with 2.39 gainers for each loser. This would have been a very nice rally, but volume was way too light.

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-- Jack Krupansky