After losing big-time on Monday of this week, the major indices recovered most of their losses on Tuesday. Wednesday saw slight slippage in the Dow Industrials and the Nasdaq, although most other indices showed some improvement; declining issues outnumbered advancing issues by 1,592 to 1,461 on the Dow, and 2213 to 1743 on the Nasdaq.

Thursday was a strong day except for the American, where continued worries over weak oil prices predominated. Today was also fairly strong with all major indices showing advances, particularly the Nasdaq, where technology issues showed stellar gains.

So much for history. Stock market historians are still a dime a dozen, and you can always find one who will tell you plenty, in exchange for a bowl of chili. It's trying to correctly foretell the future that is the toughy. I believe we have begun the year-end rally. The first several hours on Monday, December 21 may well be the indicator. My best guess (sorry folks - you may call it an informed judgement if it makes you feel better) is that if the market is steady to strong in early Monday trading, it would be a good signal that the market will go higher.

This would be after the impeachment of the President, and the cessation of the bombing of Iraq. The market has already overcome the hurdle of earnings warnings from some major companies, and should it handle the impeachment well, and should it like bombing cessation - and it should, this market would be powerful, driven by billions pouring in to buy stock.

We have been sermonizing for a long time now that cash is king, and so it has been. I do believe that now is the time for us to get out those shopping lists that we have prepared and start nibbling. Stocks that have been strong, should continue to do well particularly through December, as the mutual funds continue their year-end window dressing. I think those issues will see slowing advances next year, as the funds focus on mid-cap (1-10 billion capitalization) and value stocks.

To me, value stocks include beaten-down cyclicals such as the oils and oil drillers, particularly if you have a 1-2 year time horizon. That group also includes small-cap' and micro-cap' stocks that either have strong growth rates with low P.E.'s or are incurring modest losses but have tremendous potential. The latter would include the Biotechs/Genomics, many of which have drugs in phase III clinical testing and multiple collaborations with major drug companies.

Your best bet is to diversify by buying some of each category. If early Monday is steady to strong, I would be pretty aggressive in my investment approach. When the year-end rally kicks in, it could be impressive. And of course, their are many billions to be reinvested after the first of the year. How long the rally will go into next year is anybody's guess; I'll say at least the first two weeks in January, and then we'll reassess. If we're lucky, the rally will take us into early February, when year-end results will start coming in around February 10. Stay tuned.

The Market Pro - December 18, 1998