The Washington times., 1931-06-12
STRIKE
ON
UPSIDE
Economist Contends Market
Has Done Well Despite
News of UnfavorabIe Events
BY LEWIS HANEY

Director NeD York University,
Bureau OF Business Research
and Former Economist OF
Federal Trade Commission
Considering the current, run of
rather unfsvorable news, the
stock market has done well. For
five days, however, it has failed
to break new ground on the up
side.
: Naturally this suggests a RE
sistance level" Of course, it may
be like the level of late January,
when for IL days the market
moved sidewise and then ran up
to the February peak. That does
not now seem probable. We do
not now have the background of
expanding i Industrial activity
which existed then.
Favorable Indications
Perhaps the most favorable in
dications are found in some
strength in rail stocks and in
bonds. Certainly the rails have
been holding quite we'll, consid-
ering traffic and earnings. The
declaration of the regular divi-
dend by New York Central may
be taken to indicate some hopes
on the part Of the directors.
I am struck with the fact that
on Tuesday number of Sec
Crdary bonds took quite a jump
(Such issues as Remington Rand,
r. Hoe & Co., Porto Rican .Ameri-
can Tobacco, Container Corpora
tion, Union Oil, etc. Some day
when the financial outlook is a
little clearer we are going to wake
up and find that many good ordi-
nary bonds have been very cheap.
Look at Bonds
Maybe the "stock-minded" in
vestor is beginning to look at
bonds. 1t will really be a good
sign when he does.
But the fact remains that the
stock market has gone dead on a
rally. Trading volume has fallen
off, and no real follow through
has been apparent.
First the shorts covered. Then
the professional floor traders tried
to turn an honest penny by taking
in one another's washing. They
have been churning stocks around,
scalp1ng small profits from one
another. But that does not get
market anywhere.
So at this writing it seems, to
have made a sort Of double top"
on the rally. The usual specula-
tive sequence would be a reaction.
An Even Bet
But is a reaction near? I do
not find any very definite indica-
tions. In other words, it looks to
me like a gamble just now.
On the one hand, business news
is unfavorable. The untitled steel
orders slumped for more than
usual for the month, and scrap
prices are lower. May freight
traffic was off sharply, after al
lowance for seasonal variation,
and that means lower gross rev.
enue for railways. Employment
and payrolls in New York State
declined last month. Department
store sales were off sharply.
Wheat Prices Up
On the other hand, you have a
gain in wheat prices Cbut a
smaller CROP. and higher electri-
cal power consumption reported
for last week.
The chief force in the market
now seems to be a revival of pro-
fessional speculative activity. The
pool in Alaska Juneau is said to
have gone into Servel! There
have been evidences of artificial
one-day rallies in oils and rails.
Who can say how far such
activities may be able to get? All
I feel able to say is that funda-
mentals are not with the market
yet. and If we are not to have a
normal secondary reaction now,
the next setback is likely to be
the worse.
Better wait till speculative ac-
tivity has q f1rrner base in busi-
ness conditions.