Well! The Dow Jones Industrials broke the 10,000 barrier at 6:51 a.m, reaching 10,001 up 43 points! What a monster! This was on top of yesterday's close of 9958, the first close above 9,900.

After the record was reached, steady selling came in, and the Dow closed down 28 points. The Nasdaq held on to a modest 7 point gain, which on a % basis, was a close offset to what the Dow lost. The market is still burdened by narrow market breadth, and as you probably know from your own holdings, many stocks were down. In fact, there were more losers than winners in the two major indices. Advancing issues trailed decliners by a 13 to 16 ratio on the Dow, and by a 17 to 22 ratio on the Nasdaq.

Of course this cannot continue over the long run, but as that renowned economist John Maynard Keynes once observed, in contempt of certain long run arguments, "in the long run we'll all be dead." With that cheerful thought in mind, what do we do? Tough question.

To deal with the problem, lets amass some good old market folklore, some of which has real wisdom:

1. "The trend is your friend." Absolutely. Just look at your own personal situation. More often than not, when things are good, they get better. And when they're bad, they get worse. When certain factors are in place, similar events follow. The armies of day traders follow that theory, but they get confounded by greed, and a number of chance events. No matter what the market valuation, our economy is as good as it gets. The major factors of inflation, interest rates, full employment, high productivity, and high technological innovation are all in place. And the funds are throwing money at the most successful High Cap' stocks, both for their success and high liquidity.

2. "Trees don't grow to the sky." Right again. So that means you can't chase stocks forever and be successful, as you run into the "greater fool theory". Sooner or later we'll run out of greater fools, or as they once said in Holland "I paid a million guilders for this tulip bulb - I'll take a cheeseburger in trade".

3. "Buy good stocks when nobody wants them." True, but you might wait longer than you like for someone to want them. This is a great place to look, if you do your research and have patience. And after you have done that, I suggest you follow such a stock closely on a daily basis, and buy when the price shows signs of firming, along with increasing volume. This is when hopefully the stock has built a base and is beginning to break out to the upside.

Bringing all this brilliance together, several things are apparent. Don't sell your winners just because you're ahead, as long as the fundamentals are sound. However if you are nervous, there's nothing wrong with selling one- half of your position. I would avoid making new commitments in the issues that have brought us to these lofty levels. The market is very dangerous, and we could have a 1000-1500 point set-back before we go on to 11,000 on the Dow. Patience and cash reserves are always important tools for the successful investor. And there is no substitute for doing your homework. Even in down markets, SOME good stocks will move up. Enjoy the Bull market, and keep your powder dry. Stay tuned.

The Market Pro - March 16, 1999