The Washington times., 1931-02-14
CAUTION URGED
AS MARKET
"BO|LS''
Expert Contends That "Cheer
Leading" on Rally Will Hurt
Trend. If Carried Too Far
BY LEWIS HANEY
Director New York University Bureau
of Business Research and Former
Economist Of the Federal
Trade Commission

Of Business Research and Former
Economist Of the Federal
Trade Commission
AS I suggested on Monday, the
speculative pot has boiled over.
Wednesday the volume Of trading
reached a new high level for the
year. Prices averaged higher too,
and the rails made a new high.
But in the afternoon trading
Wednesday, the market made no
progress. The move has been so
fast that it would be logical TO
have little reaction soon. This
has been a purely speculative
move based on an oversold tech
nical condition. AS always, it will
go too far and probably be fol
lowed by a swift reaction.
Time to Watch Step
The trader should, therefore,
watch his step now. The use Of
stop loss orders seems to be logi-
cal at this time.
If you are a real investor, just
forget about the market for a
while. Investors do not buy stocks
when they are gyrating as at
present. Such wild swings as
have occurred in Auburn, Indus
trial Rayon and Vanadium have
nothing to do with investment.
In my opinion this has been a
we'll planned, concerted move. 1t
is being backed by publicity. For
example. one of the leading papers
on Tuesday gave front page space
to heralding an 18-point jump in
Auburn, and suggesting that the
market move has a real basis in
an old merger decision by a lower
court and a rumor that steel
prices may be raised!
Drive Was Setting
The much advertised bear
drive" on steel which failed" last
week was part of the stage set
ting.
can't believe that such a paper
wants to start people to apecu-
lating in Auburn. Probably, how
ever the idea is that business may
be helped by encouraging bull
ish psychology regarding stocks.
Few, if any, observers consider
this move to be based on funda-
mental conditions, such as pros
poets for earnings and dividends.
It is generally admitted that the
move primarily represents drive
against an over-eXtended short in
tereSt.
The short interest had become
vulnerable because it was swollen
by amateurs who had got tied up
in issues in which the floating
supply is small. Then, too, money
is easy and good many syndi-
Gates (poolS) have been keen to
start something.
May PrOIOng Rally
This rally may last another day
or two. But increasing caution is
to be recommended. Don't get
drawn into the market at this
time. Don't allow yourself to be-
come oVer-extended. Remember
that a reaction is certain, and
many small traders are going to
find themselves hung up with the
speculative leaders of the hour.
However, don't try to fight the
trend. The market has broken
through the previous upper re-
siStance level. Right or wrong,
it has, for the present, taken an
upward trend. I have been ad-
vising against short sales right
along. The time may soon come
when such sales will be good, but
not just now.
A Gambling Proposition
This is almost a pure gambling
proposition. But, if you must
gamble, I would stick to sound
issues. Such stocks as General
Motors, Paramount, Electric
Power and Light and Vacuum Oil
have sufficient merit behind
them, and sufficient market inter-
est for a flyer. Foster.Wheeler
may have a further move.
But I, for one, am going to
wait until the market settles
down and the business outlook
looks right before buying stocks
for investment.
The untitled orders Of the Steel
Corporation made a satisfactory
showing. The increase appears
to be better than seasonal. This
barometer will not be discourag-
ing to the bulls.