A major week for news produced minor losses for blue chips, with the Dow Jones Industrial Average falling 0.6% and the S&P 500 shedding 1%. Selling was heavier in the Nasdaq Composite, which gave up 3.2% over the five sessions. The week also ended with market participants seemingly more hardened than ever in their outlook for shares.

Befitting a nation more politically polarized than at any time in a generation, there doesn't seem to be a lot of middle ground on Wall Street these days -- people are either wildly bullish or apocalyptically bearish. That's an exaggeration, but it's striking how often either camp can look at the same event and come to decidedly different conclusions.

Case in point being Intel's ( INTC) report after the close Tuesday, in which earnings were in line with expectations but revenue slightly below. The chip giant lowered its profit outlook for the year, citing rising inventories, and lowered its gross margin guidance. But Intel also raised its third-quarter revenue outlook and denied seeing any evidence of a corporate spending slowdown, as recently cited by a number of software makers.

Major averages stumbled Wednesday in the wake of Intel's announcement, but rallied from their intraday lows and the damage was not as bad as many feared.

To optimists, the market's ability to weather the news from Intel, as well as disappointing retail sales, reflected bullish resiliency and an underlying desire of traders to buy the proverbial (and actual) dips. The bulls were further encouraged this week by strong results and/or guidance from IBM ( IBM), Novellus Systems ( NVLS), Dell ( DELL), Apple Computer ( AAPL), Johnson & Johnson ( JNJ) and McDonald's ( MCD), as well as a better-than-expected Philadelphia Fed survey.

"My tea leaves tell me that ... the big rally is within just a couple of weeks of blasting off," Don Hays of Hays Advisory Group declared Friday, citing a recent spike in the 10-day Arms Index; high equity put/call ratios; the Dow Transports' "upside breakout," attractive equity valuations relative to Treasuries; one of the "steepest and most powerful yield curves in history"; rising 2005 earning estimates; and bullish election year cycles.

The veteran strategist also suggested that as long as gold -- which ended the week down slightly at $406.80 per ounce -- remains between $370 and $419 per ounce, the Federal Reserve is getting it "just right" in its battle to defeat deflation and prevent inflation. (Yes, he used the term "Goldilocks.")

To skeptics, conversely, the fallout from Intel demonstrated a dangerous lack of fear among market participants who largely shook off a number of other negatives this week, including: disappointing earnings and/or guidance from Merrill Lynch ( MER), Bank of America ( BAC), Pfizer ( PFE) and Nokia ( NOK); a Merrill Lynch chip downgrade; and disappointing reports on weekly jobless claims, industrial production/capacity utilization and the aforementioned retail sales. Even Friday's preliminary University of Michigan consumer sentiment index, which came in at the highest level since January, was below consensus expectations.

In combination with tame consumer price index and producer price index reports, those data points reduced the odds of aggressive Fed tightening, helping fuel further weakness in the dollar, which traded at a four-month low vs. the euro Friday, and price gains in Treasuries. For the week, the yield on the benchmark 10-year note fell 9 basis points to 4.37%.

The latest signs of slowing economic activity and the absence of blockbuster earnings news from major companies raised the alert level among many market participants -- as did the market's downward trend. Despite the Comp ending the week just 7 points above its year-to-date closing low of 1876.64, several observers noted there are still high levels of bullishness (or lack of fear) in indicators such as the CBOE Market Volatility Index, and polls such as Chartcraft.com's Investors Intelligence and the American Association of Individual Investors' member survey.

"Sentiment of individual investors and professionals is excessively bullish at this time," said Bert Dohmen, president and founder of Dohmen Capital Research Institute. "That always suggests that most of the money is already in the market. Therefore, there is nothing to drive stocks higher, but plenty to drive them lower."

As with Hays, Dohmen is a veteran market watcher. So is Merrill Lynch chief technical analyst Richard McCabe, who wrote this week: "The market appears to be vulnerable to additional weakness, now or after any short-term bounce."

The Third Rail Gets Slippery

The above shows how different people can look at the same events and come to startlingly varied conclusions. Speaking of which, politics became the center of a heated debate on the RealMoney.com site this week.

Jim Cramer got the ball rolling by declaring the market to be "sick from the top down," and citing "a gradual realization that Bush will be forced out in November and a new man will be president, a man who may not be better for the stock market but one who arguably may not be worse if simply because a gridlocked government is better than the drunken spending and the no-vision team we have in now."

Cramer's comments prompted a strong rebuttal from James "Rev Shark" DePorre, to which in turn I responded.

Not wishing to rehash the debate, I bring it up only to suggest that maybe the election in November isn't having as much effect on shares as some contend. The impact of corporate earnings, valuations and sentiment are arguably similarly overstated because, as the chart below suggests, what seems to be really moving the stock market (especially tech stocks) are crude prices.

Crude climbed 3.5% this week to $41.30 late Friday, which maybe tells you all you need to know about what happened in the stock market.

Finally, I'll be back on John Batchelor's ABC Radio Network show to discuss these and related issues Friday night/Saturday morning, around 9:05 p.m. PDT/12:05 a.m. EDT. Check the ABC Radio Web site for Webcast options.

A Relationship Worth Watching
Oil and the Nasdaq 100 are running in opposition.
Source: Refco
Aaron L. Task is the assistant managing editor 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 atask@thestreet.com.