Stock Market Commentary for Friday, July 22, 2005

Despite the chatter about bombs in London, China "dropping the dollar peg", and falling oil prices, the market declined on Thursday simply due to a failure of any significant real buyers to materialize.  After the recent extended advance, traders and speculators are primed to look for any potential weakness to push the market down into a correction.  NASDAQ fell a moderate 9.97 points, but not before first setting a new intra-day peak for the year (2,193.19 vs. 2,191.60 in January) and a new intra-day peak for the advance off the October 2002 low.  Unfortunately, letting a new intra-day peak en route to a decline is a moderate yellow flag.  This kind of "sell into any rally" sentiment is not the fuel for a durable advance, but it does help to relieve some of the pressure of negative market sentiment since those sellers have that much less to sell in the future.

The economic data was fairly decent.  There was no excuse for a market decline there, especially with oil prices receding.

NASDAQ trading volume was heavy (2.10 billion shares), and breadth was moderately negative, with 1.70 losers for each gainer.  This was not a heavy sell-off since there wasn't a sharp decline, but the heavy trading volume does suggest a lot of people taking a lot of profits.  I would add another moderate yellow flag for this behavior.

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-- Jack Krupansky