Evening star., 1939-05-13
Low Stock Volume
On Dips Regarded
As Good Sign
Dow Theory Still Points
To Extension of Beor
Market, However
BY GEORGE T. HUGHES.

NEW YORK, May 13 oC.PAD.-
Hope for an extension of the current
recovery In the stock market is
strongly expressed by at least one
speculative faction.
1t is based on the action of the
market itself rather than on favor
able Interpretation of the news, al
though that is regarded as support
ing the optimistic view. Such straWs
AS the fact that. last Tuesday, for
the first time in weeks. the num-
Der of new highs exceeded the num-
Der of new lows, and the consistent
increase in volume on the rallies and
falling off on the declines are pointed
to as indicating which way the
market wind is blowing.
The defect of all theories which
depend on analysis of the price
movement itself is that they are
subject to revision without notice
1t is, nevertheless. worth noting
that better feeling exists, for the
time being at least.
Chart Theory Differs.
On the other hand, the presump-
ton under the Dow theory is that
we are still in a bear market. The
recent rally is regarded as a sec
ondary uptrend," to be followed bv
a resumption of the decline.
According to this Interpretation.
the top of the previous advance was
reached last November IL, when the
DoW-Jones industrial averages
touched l5S,41 after the Munich
pact. Up to the present, the market
has never recovered to that point,
1t made its low to date on April 8.
coincident with renewed war fears,
When the chart readers disagree
it is time for the rest of us to eXer-
else caution.
Foreign Factors Cited.
If dependence is placed on the
fundamentals, it is still true that
everything hinges on the situation
abroad. Whatever contributes to
the maintenance of peace in Europe
defining peace as the absence Of
an outbreak of general war-is bull
lSh on the market. while every re-
neWal OF tension is bearlsh.
The most reliable barometer of
the international weather is the
Dutch guilder. When the gullder
advances IN terms of the dollar, the
signal reads fair. and. when it de-
cilneS, storm warnings are flying
This year TO date, the guilder has
ranged between a high of 54.421a on
January 7, and low of 53O7l, on
March /. These quotations are in
cents per unit of Dutch currency
Fluctuations in the discounts on
contracts for forward delivery are
significant also.
The other best indicator is the
gold movement from Europe to the
united States. When that droos
the outlook is improved, and. when
the flow is resumed, conditions have
taken a turn for the worse. At this
writing, the traffic light is green.
Capital Reports Gloomy.
The Washington news is prob
ably the most important domestic
factor. Wall Street advices from
the National Capital are pessi-
mlstlc. Doubts as to any measures
for business relief being enacted
INTO law at this session are grow
ing, even if, as some congressman
would have it, both houses stay
on the job all the year.
However, industrial recovery of a
sort may appear regardless of
politics. 1t is encouraging to note
the appearance of strength in
commodities, The moody spot index
is at the highest Of the year. Rising
prices for staples usually precede
emergence from depression.
1t is interesting in this connec-
ton TO note the report of the Iron
Age that. despite the absence of
important scrap buying by domestic
mills, there has been no further
important decline in price. The
price of scrap iron and steel has
long been regarded as one of the
most sensitive recorders of business
temperature. Recently, the Insti-
tute of Scrap Iron and Steel, Inc,
pointed out that in the 244 months
since January !, 1919. when war
time price fixing ceased, the aver
age price of scrap has varied in
every month but one Over that
period. heavy melting steel scrap
at Pittsburgh has ranged from
S837 to $3.50 a ton. 1t is now
around SLABS a ton. The infer
ences here are at least negatively
favorable.