Selling Takes a Breather -- for Now - TheStreet

For those who still believe technical indicators have no bearing on market action, I direct your attention to today's session. With no other obvious catalyst to explain the action, stock proxies reversed after the

Dow Jones Industrial Average

revisited its lows of May 6.

After trading as low as 9802.23 (vs. the May 6 low of 9807.69) the Dow reversed course and closed down a relatively minor 0.1% to 9911.69.

Procter & Gamble

(PG) - Get Report

was the biggest positive influence on the index, rising 2%.

The consumer products giant was perhaps a beneficiary of the

weakening dollar, which traded at a 15-month low vs. the euro and a six-month low vs. the yen intraday, although -- like equities -- the greenback closed off its session lows.

Elsewhere, the

S&P 500

closed down 0.3% to 1064.65 vs. its intraday low of 1054.26, while the

Nasdaq Composite

closed up 0.5% to 1631.91 after having traded as low as 1607.30. Neither the S&P nor the Comp traded close to their May lows of 1049 and 1560, respectively, but appeared to get a lift when the Dow made its successful test.

That's not to say the session was anything for bulls to get overly excited about. Trading volumes remain muted, approximately 69% of

Big Board

volume was to the downside, and losers bested winners in both Big Board and over-the-counter trading, where new 52-week lows led highs 130 to 97.

Earlier in the day, the market was "held down by the general malaise" brought on by continued fears over the tensions in the Middle East and escalating rhetoric between India and Pakistan, said Bob Basel, head of listed trading at Salomon Smith Barney. In addition, a

Federal Bureau of Investigation

warning about possible missile attacks on commercial aircraft and the ceremony signaling the official end of cleanup and recovery efforts at Ground Zero -- including a two-minute moment of silence at the

New York Stock Exchange

-- provided the latest reminders of the ongoing concerns about potential terrorist attacks, the trader said.

With laudable candor, Basel admitted to what few other traders would in our

recent story about the lingering impact Sept. 11 is having on traders' psyche: "You can't say

Sept. 11 isn't in the back of people's minds," he said. "It's always present here

in Lower Manhattan. All you have to do is look down the block and see the Trade Centers are gone."

Basel stressed such concerns aren't an overwhelming factor in trading, but it seems increasingly clear they are having a subtle, even subconscious (for some) effect.

As for today's reversal, the trader suggested it was simply a matter of "some stocks and the market itself either oversold or at the lower end of trading ranges, so it was time for buyers to step in." The Dow's ability to rally after revisiting the lows from early May being a signal to some that it was safe to get back in the water, at least for the afternoon. Basel, for one, "wouldn't be surprised to see the momentum continue into tomorrow."

No Capitulation

There's been a lot of talk about capitulation of late and, perhaps, an overzealousness among market watchers and participants to say it's occurred. Many believe the market needs a cathartic selloff to signal that the selling has finally run its course.

On the other hand, some contend the market has experienced a "rolling capitulation," evidenced by the public's increasing lack of (obvious) interest in the stock market. Certainly, there's been a tremendous diminution in the stock market's cachet, and rightfully and understandably so. But those who believe that's proof retail investors have "given up" on stocks, and thus the much-anticipated capitulation has occurred, overlook the fact that actions speak louder than words (or the absence thereof).

Specifically, I'm talking about mutual funds inflows into equity funds. The public continues to demonstrate its long-term faith in the stock market by putting money into equity mutual funds, rather than taking it out in mass quantities as occurred in previous periods when the stock market was really

investment non grata

.

Today, the Investment Company Institute reported stock funds had inflows of $11.76 billion in April, following inflows of $29.63 billion in March. Year-to-date, equity funds have tallied net new cash inflow of $66.84 billion after taking in just over $20 billon in 2001 and more than $309 billion in 2000.

So, yes, retail investors have dramatically ratcheted down their enthusiasm for stocks from the heyday. But to say they've completely "given up" on equities isn't reflected in the reality of the data.

No Capitulation, Part X

Recalling

last night's column, several readers were ready to read last rites for Trader X today, as

Applied Materials

(AMAT) - Get Report

traded as low as $21.82 on heavy volume. However, AMAT ended just above the $22 threshold prescribed by Trader X, closing down 2.2% to $22.59 on 113% of its 30-day average daily volume.

Whether this proves to be a temporary reprieve for the mysterious trader remains to be seen but, true to form, he remains ever confident and quite bullish on the Nasdaq.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.