This has been one hell of a market since we last talked on Monday. The Bears cleaned up on the Bulls, taking the Dow down 235 points in the process. If the market stayed down at its low today, when it was down 125 before coming back to a plus 23, it would have been a real bloodbath. Anyway, it was bad enough, and all the fox holes were full of shell-shocked Bulls.

We had previously noted that these would be choppy markets, at least until earnings reporting time, which begins around July 10 with the financials. From Tuesday on, it was worse than choppy, with only today's rally giving some encouragement to the Bulls. A defensive posture is still in order, meaning no margin, no options, and no new positions. Basically, Stock Lent is still with us. Remember, if you're worrying that your profits are eroding but the stock still has good fundamentals, its okay to sell one-half of your position. But if you do, think seriously of selling at least an equal dollar amount of losers, which probably have some negative fundamental aspect. That way your portfolio won't get overweighted in weak stocks.

Many times I have seen market lows reached in the last week of June, and I wouldn't be surprised if this month is no exception. If you have thoughts of buying in the next 30 days, pay special attention to relative strength. I am partial to the Drug stocks, as the good ones have a good pipeline of new drugs, reliable earnings growth, and relative immunity from any prospect of a less robust economy. People want to live, even in slower economic times. And who knows, maybe the economy will do better than many pundits expect.

With that in mind, I particularly like American Home Products which is up 1/4 for the week at 51 7/8, Pfizer which is up 15/16 at 109 5/16, and Warner Lambert which is up 3/8 for the week at 62 5/8. Two other great Drug companies that I don't directly track but I do keep my left eye on are Johnson and Johnson and Merck. What can you do? You can't buy them all and you can't track them all. And don't be scared off by their high prices. All you should be concerned with is the percent you make on your investment in any given time period. As I love to say, a 100 dollar stock is more likely to go to 200 before a 1 dollar stock will go to two. The same people who will dispute that are the same ones who like to say "the rich get richer and the poor get poorer." If anyone can't get the connection, they are at least semi-nuts and should stick to investing in their savings account. Stay tuned.

The Market Pro - June 12, 1998