Evening star., 1938-06-08
BEAR INFLUENCE
HELD LOSING GRIP
Drying Up of Liquidation
Cited-Stocks Do Not
Come Out for Sale.
BY GEORGE T. HUGHES.

NEW YORK, June 8.-(N.A.N.A.).-
The stock market drags wearily along.
without apparent trend and with vol
ume close to the vanishing point.
In May transactions were the lowest
for that month in IA years. Last Fri
day the turnover was only 2S4 1000, the
lowest for q full day since August,
1894. So far in June trading has
been equally sluggish. 1t has at no
time equaled 100000 shares. The
ticker stands still for minutes at a
time. Outside interest is non-existent.
This is the first and most significant
fact to be taken into account In any
general appraisal of the longer out
look. It suggests drying up OF liqui-
dation, q condition which always COIN
cides. with the last stage Of a bear
market. Bull markets make their peak
on rising volume, speculative excite
ment and general turning about OF
prices. Bear markets end in lassitude.
News With the Bears.
On balance, sentiment Is bearish,
and that is usual In the last phase of
prolonged decline, just as 1t Is normal
for sentiment to be bullish at the top Of
. prolonged advance.
The bears have the news with them.
The business outlook is poor. There is
q steady dribble of dividend reductions
and omissions, commodity prices are
weak, announcements of the closing of
plants for more or less extended periods
are common, unemployment is in
creasing. There is no confidence in
the proposals from Washington for
combating the depression. The short
interest is sure that still lower prices
for stocks are inevitable.
The whole picture is dark and dis
And yet stocks do not come
out for sale. Holders seem determined
to s9e it out. Activity, such as it is,
picks up on the rallies and falls of
on the reaction. Again, all these are
signs of a sold-out state.
Beats Business to Recovery.
The second thing to remember is
that, according to the experience of
the past, the stock market RECEIVERS
from depression well In advance Of
business. In 1882. stocks made their
lows with the banking holidays still to
come and with commodities still going
down.
The only question ic whether the
strict regulation of trading under Gov
ernment control makes the old rule OBJ
solete. Insiders do not have the
buying power they used to have. Prob
ably that reservation is overempha-
sized in current comment, but it de-
serves mention.
Although obstacles have been put
in the way of short selling both in
round and in odd lots, there is a sizable
short interest outstanding. At last
accounts it amounted to 1894 ,000
shares, which sounds like a modest to-
tai, but which is more impressive when
compared with the rate of trading.
A writer in Barron's estimates that
it would take the bears little more
than three days to cover if they bought
every share of stock sold, volume re-
naming the same. OF course, if any
such covering movement did begin.
volume would not remain the same, for
the shorts would have competition on
the buying side. s..
March 81 Low Date.
The market as whole made its low
on March 81. Separate groups made
their lows in that week or the imme-
diately preceding week, according to
the Standard Statistics index, with
the exception of agricultural imple-
ment, anthracite coal and copper
shares. Many individual issues have
made new lows since, but, on the
other hand, there is a fair-sized num-
Der which have displayed strong re-
sistance to the trend In this group
the gold shares are the leaders, but
they are followed by certain food
stocks. 1t would be normal for the
food to be in the van on the recovery.
The third factor not to be over
looked is the enormous potential buy
ing power represented by idle funds.
There is a great reservoir of cash to
be drawn upon, If and when indica-
tions favor its use. incidentally.
stocks are hard to buy" in any large
amounts, either on the exchange or
over the counter. There is no record
of such situation in a past depres-
sion comparable to this one. Now
and then q hint Of this underlying
condition appears in the avid demand
for new offerings of high grade. The
way in which the United States Steel
debentures were marketed is one strik-
ing illustration.
Possibly the bears are right and
stocks will break through their March
lows, but the risks of holding to a
short position increase as time goes on
without that happening.
Copyright. 1898. by the North American
Newspaper Alliance, Inc.)