Stock Market Commentary for Monday, May 16, 2005

[Some minor changes in the actual column since Saturday]

Dell's (DELL) quarterly report gave Nasdaq a boost.  Still, trading was more technical in nature than based on longer-term economic and business fundamentals.  Nasdaq had a moderate gain of 12.90 points, still not quite enough to establish a "higher high" to indicate a bullish trend.

Unfortunately, Nasdaq closed well off its intra-day peak (by 13 points) and modestly below its opening level (by 1.50 points).  That's a moderate yellow flag, suggesting that a fair amount of "sell into any rally" sentiment still haunts the market.

The intra-day peak was probably due simply to short-covering, and then the bears put some of their shorts back on once the rally petered out.

Nasdaq trading volume was moderate (1.88 billion shares), and breadth was moderately negative, with 1.26 losers for each gainer.  The moderately negative breadth on a moderate gain is rather unusual and suggests that people were dumping smaller-cap stocks in favor or larger-cap tech stocks.  In fact, my favored S&P 500 Tech Sector "Spider" (XLK) was up 1.26%, and (besides Dell) that includes Dow Industrial components IBM (IBM), Hewlett-Packard (HPQ), Microsoft (MSFT), and Intel (INTC) on a day when the Dow declined.  H-P was up 2.33% as it was announced that Carl Icahn had taken a stake in the company.

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-- Jack Krupansky