Yesterday and today, the market really stunk. This is a tough way to make a buck. You may recall that I have been expecting choppy markets until the Fed meets this coming Tuesday the 19th. After the Fed's actions are known, which should be an hour or two before the market closes, we should see a relief rally. Failing that, look for a rally on Wednesday. Failing that, this would be a very bad indication of underlying weakness. No one knows, of course, especially me and everyone else.

The analysts and fund managers like to sound very knowledgeable on this, but their guess is just that. I still expect the Fed to stand pat on rates, and I would improve those odds to 60%. In times like these, you must stick to the basic strategy - avoid margin and try to reduce or eliminate it if you have it, only buy those stocks you have thoroughly analyzed and feel good about, and try to buy when the price has pulled back some. If you are keeping your losers more out of belief in the power of prayer than your knowledge of anticipated positive business developments, sell it. Then take the proceeds and sit on it. When markets stink, cash is king.

Now that I have prepared you for dealing with a weak market, let's take a look at what I believe to be the more likely case. After Tuesday's anticipated Fed inaction, money can be made as that should lead to a rally. Favorable inflation and interest rates coupled with good productivity and earnings mean good markets. And now with the Indonesians playing lets pretend it's Watts, and with the Indians, who are as poor as church mice and building expensive bombs, money will continue to gravitate to the United States. Yes, this Bull market can't go on forever. But if you try to predict when it will end, you most likely will be as wrong as the experts who have been predicting the end for almost the last 4000 Dow points. Stay bullish and stay watchful. Stay tuned.

The Market Pro - May 15, 1998