On Wednesday we observed that in a market that is down 207 on Monday, and then vis up 164 on Wednesday is a market where you can get whip-sawed to death. Well, after a moderately weak Thursday, Friday's 100 point drop was whip-sawing at its finest.

In the same Wednesday column, we felt that after our Yen propping intervention, Japan was likely to give us a lot of talk with little to show for it. and that it would be very troublesome for the market after that realization set in. On Friday, all you heard was that not much would happen in Japan until after their parliamentary elections July 9 or thereabouts. Now we hear that the answers to their problems are not purely economic, but also cultural, as though that is news.

Second quarter earnings will come out about the same time as the Japanese elections, so don't look for anything different than what you've seen lately. You need patience and guts. Refrain from making new commitments, except for those of you making regular constant dollar investments. The market is deceivingly dangerous, as the major market averages are performing much better than the overall market as measured by the greater number of declining stocks vs. advancing stocks since early April. I think most of us have second or third tier stocks and can attest to the beating they have taken, as compared to the major averages.

There have been a number of negative pre-earnings announcements, and these always spook the market. Hopefully, earnings reporting next month will see generally positive numbers. The majority of pundits are looking for 1998 earnings growth of around 8%, and with any kind of luck, we'll see better numbers than that. This would be the spark to the long-awaited summer rally, if we're going to get one. Stay tuned.

The Market Pro - June 19, 1998