This has been a tough week. The Dow is down almost 100 and the Nasdaq is down over 36 (the approximate equivalent of 180 Dow points). Only the Dow Utility Index has done well, and it has been spectacular with a gain of 5.87, all of it due to Monday's record breaking rise of 7.16 points. As you know, utilities are a domestic haven in these times of international uncertainty.

In reviewing our strategy during these choppy markets, I would suggest taking no new positions aside from any monthly constant dollar investments you may have been making; such an approach, buying more stocks when the market is down and fewer stocks when the market is up, is one great long-term approach to the market.

When looking for future buys, it is extremely helpful to be tracking as many of your favorite stocks as you can, given your time constraints. Stock Market Hounds hate to have to earn a living, as it interferes with what they love to do best - spend time with the market. I like to make note of the last, change, open, high, low, close, and volume of my tracking stocks. When viewing that data against changes in the indices, you will come up with your own sense of relative strength.

Relative strength is a purely technical tool, as it disregards a company's fundamentals, the theory being that all pertinent facts are reflected in the stock price. I don't believe that's always the case, but enough people do, so you better pay attention to that. Relative strength had better flash a lot of alarm bells in your head when the market is rising and your stocks are going nowhere, and if they're going down, run - don't walk to the nearest exit.

Although I am basically a fundamental investor, I particularly like relative strength in these indecisive/negative markets. You must always be thinking which stocks you will sell if they get any weaker. But when the market has been taking gas, and your stock(s) have been down much less percentage wise, that's a great sign. If the opposite is true, you have a problem.

As I continually review my positions for the weakest sister to get rid of, I'm looking for which of my favorite prospective buys are hanging in there like troopers. This also applies to stocks you have, and would like adding to your position. If you feel you must take advantage of a good opportunity, consider selling your weakest acting stock to pay for it, and not coming up with additional funds. And when your weakest acting stock has poor fundamentals to boot, the decision has been made for you. Some people make the mistake of selling the stock that has been doing well to buy something else, instead of paying for it by selling their stinkers. Remember what Peter Lynch says - "don't cut your flowers and water your weeds." Stay tuned.

The Market Pro - June 3, 1998