I didn't like today at all. The trading was very ominous, and I hope it's a temporary phase. I didn't like the way the Dow Industrials were up 125 points, only to finish down 19. Similarly, the Nasdaq had been up 66 points, but finished up only 7. This came on the heels of pretty good Greenspan testimony before Congress, and in the wake of earnings reports with more upside surprises than downside. Also, although the outcome in Brazil was still unknown, they were taking steps in the right direction.

So why did the market give up all of its gains? The honest answer is who knows? But let's see if there was unusual action that might give us some insight. First, some "good" stocks with good news and solid prospects had substantial losses. Agouron Pharmaceuticals (AGPH) was down 7 points at 50 3/4; the only news was from the day before, when they invested an additional $5 million in the Immune Response Corp. (IMNR) for the development of REMUNE(TM).

Network Associates (NETA) was down 7 11/16 @ 45 3/16 with the announcement of a new anti- virus program for a Lotus environment. Finally, Qualcomm (QCOM) was down 4 @ 62, after reporting the highest quarterly revenues in their 13-year history; diluted EPS was up 30%, at $.65 vs. $.50. I would say that all 3 companies had good news.

This kind of action just tells me that investors are nervous and grabbing profits where they can, as opposed to the longer term view of letting their profits run. I think some of the uneasiness stems from the Internets eroding in price for over a week now. Their fate shouldn't affect other stocks, but it does. When the cows see the farmer loading his truck with sheep to take them to the slaughterhouse, it's hard for them to give milk.

As you know by now, I follow 15 Internet stocks. Today, 15 were down. Gee, I wonder if there's a message here. It is sadistically interesting to note the following slaughter:

I bet these investors have had a hell of a lot of fun that they'll never forget. Unfortunately for them, I believe the Internet correction is just getting underway. Ah, tulip bulbs, where is thy sting?

In the meanwhile, this market strikes me as too unpredictable with these backdrops. Sure, money is most likely still coming in for reinvestment, but I don't know how much it may have fallen off, nor do I know how much is targeted for investment in stocks. So all you can do is take a conservative stance until things clear up. That means take profits where you think your stock price fully reflects its near-term prospects, and when in doubt, sell half and keep half. It also means hold off from making new investments and accumulate cash. Because CASH IS KING again! Stay tuned.

The Market Pro - January 20, 1999