Traders and short-term speculators tried to spook the market on Tuesday, and actually did for most of the day, but their tricks finally backfired and a recovery after 2:00 p.m. resulted in Nasdaq finally closing again above the magical psychological level of 2,000. Nasdaq rose a moderate 9.72 points, but unfortunately on such anemic trading volume that we shouldn't take too much comfort from this "rally". Still, a rally is a rally.
Some people suggested that the market rallied on comments from Treasury Secretary Snow on revaluation of the Chinese currency, but I don't buy that at all. I suspect that early market weakness was mostly due to day trading and a little real buying over the course of the day resulted in day traders having to close their short positions at a loss. Essentially, the late-day rally was a short-covering rally.
Some people blamed early market weakness on "inflation concerns" and even rumors of a George Soros fund selling tech stocks. Lots of nonsense is floating around, but that's the primary currency of traders and short-term speculators. The inflation picture isn't any worse than a day ago or a week ago.
With Nasdaq only a mere 4 points above the 2,000 level, even a tiny bit of profit-taking or negative sentiment could send the market back down. That said, we've set new closing and intra-day highs for the latest up-leg which is now 13 days old. That's fairly impressive after all the recent negative market sentiment.
Overall, the economic data was mixed, which is no real change.
Nasdaq trading volume was very light
(1.57 billion shares), and breadth was modestly
positive, with 1.18 gainers for each loser. Once again, with such light volume, and with such mediocre breadth, we cannot consider this a true (durable) "rally."Click here to read the entire column
-- Jack Krupansky