Market Maintains Its Sense Over DollarBY CHRIS GESSEL INVESTOR'S BUSINESS DAILY "Dollar Dive Slams U.S. Stocks," blared one popular financial Web site Monday. Another weighed in with "Stocks Stung By Dollar's Sharp Drop." Judging by the headlines, the stock market must have taken a beating. But the wounds were only skin deep. Stocks did indeed gap down Monday morning after the Group of Seven industrial nations — the U.S., Britain, Canada, France, Germany, Italy and Japan — urged more flexible exchange rates to smooth out global economic imbalances. Traders sold the dollar, which raised fears that overseas investors would dump U.S. assets. The market-leading Nasdaq lost 1.6%, erasing more than half of last week's gains. The tech-heavy index still closed above its short-term 10-day moving average, which suggests it was extended and due for a pullback. That was the worst of it for the major indexes. The small-cap S&P 600 declined 1.3%. The benchmark and big-cap S&P 500 gave back 1.2%. Volume rolled in quieter the entire session. NYSE trading was even below average. That tells you institutional investors weren't heavy sellers, a bullish divergence on a seemingly bad day.
Mutual funds, pensions and other professional investors are too big to hide their tracks. Serious selling on their part would have been accompanied by a sharp spike in trading volume. Even better? More than a few leading stocks turned in powerful gains. It was hard to find a heavy sell-off among the market's top-rated stocks. The leaders' relative strength showed up clearly in the Investor's Business Daily 100. The list tracks some of the most dynamic companies trading in the U.S. While the media were obsessing over the yen's rise and the dollar's fall, IBD 100 stocks dipped less than 0.3% on average. Take a look at a long-term chart of the yen and you'll yawn. U.S. stocks can rally powerfully regardless of the yen's direction. The past seven weeks are a good example. On Aug. 1, 10,000 yen traded as low as $82.96. On Monday, it closed near $89.32, an appreciation of almost 7.7%. The Nasdaq during that period? Up 9.4%. Monday's quiet decline also showed it still doesn't take much to rattle investors, who haven't gotten over the bear market. Despite some persistently high readings on sentiment surveys, psychological indicators that reflect real money tell a different story. People might claim to be confidently bullish. But they head for the hills at the slightest whiff of weakness. The put-call volume ratio is a perfect example. It measures how many bearish put options investors are buying relative to bullish calls. It shoots higher when fear runs rampant, spurring traders to load up on puts. The put-call ratio jumped 11 notches to 0.81 on Monday. That's a remarkably high reading when you consider the Nasdaq has rallied 40% this year and closed just 2% below its recent peak. | 
