NEW YORK — IF you're wondering why the stock market seems headed relentlessly upward, consider the seven-second factor.
Roughly every seven seconds, a baby boomer turns 50. As the boomer generation nears retirement, it is learning to save.
''My wife, Judy, and I invest in 21 mutual funds, most of them equity funds, and we see no reason to pull back,'' says Jim Zelenski, deputy city manager of Lakewood, Colo.
The stock market - propelled by massive inflows into equity mutual funds from boomers such as the Zelenskis - is on an upward roll. The Dow Jones industrial average has shot above 5,600 points this week, setting a new record.
A big question on Wall Street these days: To what extent does this liquidity - the often-automatic influx of retirement investment money - protect the market from downward ''corrections'' at times when investors get nervous about recession or the possibility that stock values have simply gotten too high?
''There's nothing in sight now to derail this market, with liquidity high, interest rates falling, and inflation staying low,'' says Hildegard Zagorski, an analyst at Prudential Securities Inc. in New York
Robert Parks, a Wall Street economist, throws cold water on the liquidity thesis, noting that the same argument was made prior to the Oct. 19, 1987 crash in the stock market in this country and the bursting of the bubble in the Japanese market in 1989.
But David Blitzer, chief economist for Standard & Poor's Corp. in New York, says retirement dollars represent an underlying source of stability to the stock market, shoring up share prices and acting as a brake on declines.
Much new money is flowing in as automatic monthly or biweekly investments, deducted from paychecks or contributed by employers to retirement plans such as corporate 401(k) or tax-exempt 403(b) accounts.
''In these [retirement] plans, there is very little ability to get your monies pulled out in some type of 'mad panic,' such as in a few days,'' Mr. Blitzer says. ''There is paperwork to be filled out, offices to contact.'' Moreover, many investors, and pension-fund managers in particular, he says, remember the main lesson of the 1987 crash. ''Investors who quickly pulled out of the market were burned. Investors who stayed cool and remained in the market saw their losses recouped by early 1988.''
Some analysts say the automatic deposits and the seven-second factor will provide only a limited cushion if momentum for a downward correction builds. Mr. Parks expects a recession and 13 percent drop in profits this year.
Yet recent inflows have been huge. In January, a record $24.5 billion flowed into equity mutual funds, according to estimates by the Investment Company Institute, a Washington-based mutual-fund trade group. Mutual-fund money still represents only 13 percent of American stock investments, though that percentage is rising.
Blitzer does not rule out a correction of 5 to 10 percent this year, but he expects stocks to keep climbing. Interest-rate cuts by the Federal Reserve ''will offset worries about slower corporate earnings,'' and keep momentum rolling, he says.
With interest rates low, many people see stocks as the best place to save for retirement.
Stocks have been the ''main instruments'' for financial gain for much of the 1990s, says Gene Jay Seagle, president of Tactics & Technics, a financial consulting firm in Weston, Conn. The returns on money market accounts, certificates of deposit, and passbook savings accounts have all paled next to the double-digit gains of stocks.
He says the Dow could roar right up to the 6,000 point level this year.
Retirement plans, including IRAs (individual retirement accounts) as well as 401(k) and 403(b) plans, now amount to $716 billion, or one-third of all mutual fund assets.
Overseas money arrives
Another little-noticed factor also shoring up equities is the massive inflow of overseas money into bonds in the past year, says David Strongin, director of international finance for the Securities Industry Association, a trade group here. During the first nine months of 1995, foreign investors plopped a record $123 billion in the US Treasury-bond market, up from $79 billion in 1994, Mr. Strongin says. ''That is a very positive factor for the stock market, because the capital inflows reduce US interest rates, which lowers corporate borrowing costs, making stocks more attractive.''
Massive buybacks of their own stock by many corporations over the past year has also shored up the equities market by reducing supply of equity. They bought $213 billion of their own shares in the first three quarters of 1995.