Save for Tuesday's slide, the drama was beneath the surface in the stock market this week and centered in other assets, particularly the dollar, gold and oil.

For the week, the

Dow Jones Industrial Average

fell 0.5%, the

S&P 500

shed 0.3%, and the

Nasdaq Composite

lost 0.9%. Most of the damage occurred Tuesday, when the Dow and S&P each fell over 1% and the Comp shed 1.7%.

Given the largely positive fundamental backdrop on Tuesday -- featuring a sharp drop in oil prices and reports of

Johnson & Johnson's

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bid for



-- the decline begged a technical analysis.

For chart readers, the day was troubling for the Nasdaq, as it marked the fourth consecutive session in which the index surpassed its January 2004 high of 2053.86 intraday, only to reverse and close below that level. Tuesday's session was more significant than the prior three "tests" of that "resistance," because the index closed significantly below the January high (2114.65), a decline accompanied by a sharp increase in volume.

The resulting "outside day" -- a higher intraday high than the prior day but lower intraday low and close -- was important, "but there's nothing in and of that day to suggest a change in trend," said John Bollinger, president of Bollinger Capital Management in Manhattan Beach, Calif.

There was little follow-through selling for the remainder of the week, he noted -- weakness in former highfliers such as

Sirius Satellite Radio

(SIRI) - Get Report

aside. Notably, Thursday saw the major indices recover from early losses as

National Semiconductor's


midquarter update, reports of a potential






merger and

Toll Brothers'

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stellar earnings helped overcome the shadow cast Wednesday evening by disappointing updates from


(ALTR) - Get Report



(XLNX) - Get Report




. On Friday, major averages ended virtually unchanged.

Tuesday's decline "got people's attention," but there have been several similar sessions during the Comp's roughly 400-point rally from its August lows, Bollinger observed. "We can back and fill and then make another upside attempt. If


fails and we start to show some divergences and deterioration in the short- and intermediate-term indicators, then I'll get worried. It's too early yet."

Indeed, most traders remain quite bullish. Given the huge gains in preceding months, a little churning to start December will probably prove to be the proverbial pause that refreshes before the traditional "Santa Claus rally" in the latter part of December.

Still, just about everybody on Wall Street thinks that's the case, and the alternative scenario -- that those early 2004 highs prove to be tougher-than-expected resistance -- deserves at least passing consideration.

Greenback Comeback

Speaking of consensus opinion, I recently

wrote about how the overwhelmingly bearish sentiment on the dollar and bullish sentiment on gold could augur a reversal of those trends. The reversal emerged this week as the dollar enjoyed its biggest weekly gain vs. the yen since February -- hitting a one-month high of 106 yen intraday Friday -- while snapping an 11-week losing streak vs. the euro, which was trading at $1.323 late Friday vs. Tuesday's record high of $1.347.

Gold suffered as the dollar rallied, with the yellow metal losing 2.8% on the week to $436.10 Friday. The damage largely occurred Wednesday when gold plummeted nearly $15 per ounce, albeit after recently hitting 16-year highs above $454 per ounce.

The dollar's rally (and gold's fall) came amid disappointing economic reports out of Japan and France, as well as disapproving comments from Japanese and European officials about the dollar's recent decline. The greenback was further aided by Friday's stronger-than-expected University of Michigan consumer confidence report as well as a series of data points showing improvement in consumers' balance sheets, as reported


Still, the U.S. economic data was far from universally positive, although Friday's higher-than-expected producer price index was largely attributed to higher energy prices, which continued their recent decline. For the week, crude prices fell 4.3% to $40.70 per barrel, dropping 4.3% Friday despite OPEC's production-cut announcement.

Harder to dismiss than the PPI were Monday's weaker-than-expected productivity report and Wednesday's higher-than-expected jobless claims data; the latter came amid layoff announcements this week by firms such as


(CL) - Get Report




. Meanwhile, the Labor Department reported that import prices

excluding oil

rose 0.7% in November and 3.4% over the past 12 months (largely due to the falling dollar), and holiday retail sales remain sluggish at all but the highest-end outlets.

Keeping with the theme of challenging conventional wisdom, here are a few thoughts on jobs: After the October jobs data, everybody thought the long-awaited, oft-elusive strong job market was back and that it would be off to the races from here on out (into infinity, I suppose).

November's data threw cold water on that theory, but I think the bulk of pundits out there


believe a robust job market is "just around the corner," which, of course, buttresses their bullishness on equities and bearishness on Treasuries, which rallied this week amid record demand for Wednesday's five-year auction and ahead of the

Federal Reserve's

widely expected rate hike on Tuesday. The yield on the benchmark 10-year, which moves in opposition to its prices, fell 10 basis points this week to 4.15%.

It's not that stocks can't do well if the job market continues to stutter-step, but the econ-bulls should note that the folks at the Economic Cycle Research Institute are sticking with their long-held view that this recovery will be subpar -- especially on the jobs front.

"Bottom line, there's likely to be no imminent cyclical reacceleration in job growth. Also, there's the structural drag

due to technology and globalization that serves to dampen job growth relative to GDP growth," Anirvan Banerji, director of research at ECRI, opined on

on Thursday. "Thus, the kind of whisper numbers that were being bruited about last Friday -- 300,000 to 350,000 jobs -- were a fantasy, and, blips aside, will remain so for the time being."

Something else to contemplate, to be sure.

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