In our last article December 9, we ended by saying BEWARE THE IDES OF JANUARY! As that time is approaching, it's worth taking another look at it.

Many years ago, a big California politician coined the phrase "Money is the mother's milk of politics". He was so right. I would be even more correct by saying that money is the mother's milk of the stock market. Just look at this month. 401k and IRA money starts being reinvested on the 3^rd business day of the month, which this month meant Wednesday, January 5. The lack of big money inflows had a particularly severe negative impact, as it coincided with big waves of selling, as many individuals with large paper profits had waited until this year to take them.

On Monday, January 3, the Dow was down 139, and the Nasdaq was up 61. On Tuesday, January 4, the Dow was down 359, and the Nasdaq was down 229. With money starting to come in on Wednesday, January 5, the four days beginning January 5 looked like this: Dow up 124, 130, 269, and 49; Nasdaq down 24, and 150, and then up 155, and 167. Sure, there are always cross-currents like switches into Utilities and Industrials early in the month, but I believe that the impact of large fund inflows is unmistakable.

Today was interesting, with the Dow down 61, and the Nasdaq down 128. The AOL and Time Warner proposed merger unsettled the market in the sense of what is proper pricing for Internet stocks? What is the trade-off between high revenue growth and high cash flows? Well, I don't know, and the market doesn't either. That gives you high volatility as investors try to figure it out. The market also was due for some profit taking after some large recent run-ups, especially in the Biotechs. Look at these impressive casualties today:

I didn't go out of my way to find these 22 examples of sizeable losses, as they are part of the 100 stocks I track on a daily basis. I track this group because I either own them, would like to own them, or I think they are a good barometer of what's going on in the market. I track Internet stocks and a larger group of Biotech stocks, but I think that a review of this group of 100 is enough for today's article.

What's the point of all this? I'm glad you asked. If we have this volatility with 401k and IRA money pouring in, what happens when it slows down? Wow! Did I have to ask such an ugly question? You bet. If the big money slows down after the middle of the month, that means that the funds that would have come in by the 15^th, which is a Saturday, and with Monday being a holiday, peak inflows may arrive by Tuesday, January 18, with market weakness beginning on Wednesday, January 19.

Of course, I could be dead wrong, but any idea is better than no idea, and any system is better than no system. Coinciding with this projected timing, is the market's concern with falling bond prices, and the Federal Reserve's early February meeting. Accordingly, caution is in order, and as I told you at the beginning, "BEWARE THE IDES OF JANUARY"! Stay Tuned.

The Market Pro - January 11, 2000