Stock Market Commentary for Friday, August 5, 2005

Despite the chattering about "reasons", the market decline on Thursday was simply the kind of old-fashioned profit-taking that we tend to see after an extended upwards move has run out of steam.  Short-term momentum speculators pile on on the way up but bail out when momentum looks at risk of reversing.  At that point they reverse and bet on the decline, exaggerating the sharpness of the decline.  NASDAQ lost a sharp 25.49 points.

There was a lot of chatter about lousy retail sales, but that was just for a few stores.  I expect that the monthly report, due out next Thursday, will be much better.

I suspect that there may have been some people who were worried that the monthly employment would be weak.

NASDAQ trading volume was very light (1.65 billion shares), and breadth was very strongly negative, with 2.30 losers for each gainer.  This would have been a heavy sell-off, but trading volume was much too weak and the point decline wasn't much more than 1%.  Such volatility is not uncommon when trading volume is light.

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-- Jack Krupansky