Today was brutal. The depth of the decline was bad enough as exhibited by all major indices except the Dow Utilities, but was even worse when viewing the Nasdaq new highs and lows. They were a whopping 7 to 683! That's almost bad enough to make a guy want to go into real estate.

The flight to quality was there of course, as shown by the Dow Utilities being up a large fraction, and the 30 year Treasuries rising 3 ticks ( 3/32) to give that issue a record low yield of 5.42%. The small cap's are being decimated per the Russell 2000 reaching another low for the year at 380.41, down a crunching 9.35. If you own any small stocks, you don't need an index reading to tell you that you're getting killed.

It's interesting to hear the pundits at long last recommend electric utilities as a safe haven because of their yield, etc.; our readers have been reading about that from us for some time now. What is surprising to some extent is the continued pounding taken by the oils and oil service sectors. Sure, we recognize that the supply/demand situation is bad, and that day rates for drillers are declining. But still, from the action of these stocks, you would think that the world was switching away from oil.

It ain't going to happen. One fine day, or maybe one fine year, Asia will come out of their slump. Between both them and third world countries increasing their demand, oil will go up again big time. I suppose it's a little too early to start nibbling, unless you absolutely had to put money to work in equities. And of course, trying to pick the low is a sport best left to chronic losers. That said, watch that group for your entry point.

I hope you have been pulling in your horns as we have discussed these past weeks. Resist the temptation to jump at these low prices, as the bargains are likely to get better before they get worse. I still view this as a correction in a bull market, but you must remain cautious. Sunshine always follows the storm, but when there's a hurricane out there, I think the smarter guys are inside. Remember above all else - CASH IS KING! Stay tuned.

The Market Pro - August 26, 1998