Market-watchers see run-up as 'late spring'

Bull markets are like the seasons. There is a spring when stocks shoot up like new flowers; there is a summer when the market fully blossoms; and there's an autumn, when there are signs that stocks, like leaves, are ready to fall. By the time winter comes to a bull market, it's time to be in cash again.

So far, market seers claim, the current market is in late spring. The leadership is changing somewhat, or as market observers put it, ''rotating.''

In the market's initial surge, the chief beneficiaries were the large, well-capitalized blue chip stocks: General Motors, IBM, General Electric, etc. As Leslie Alperstein, director of research at Bache Halsey Stuart Shields Inc., notes: ''The logic was simple: With billions of dollars sitting on the sidelines , the portfolio managers said, 'If I want to be in the market I can't get too cute. I need the big-capitalization stocks.' ''

By buying these stocks, managers could invest large sums of money without running the price up as much as they would if they bought stocks without many shares outstanding. Besides, the stocks of larger companies were safe. They had the financial backing to weather the recession; high-caliber management; and excellent track records.

Included in the initial surge were retailers, defense companies, health care firms, and the top companies in the chemical, paper, forest products, and drug industries.

In the next phase - or summer - of the bull market, notes Leon Cooperman of Goldman, Sachs, a brokerage house, the buying spreads to ''safe'' cyclicals and companies that typically outperform the market during the early stages of an economic recovery. Mr. Cooperman expects these companies to include aerospace and defense companies, airlines, auto aftermarket companies, building materials and home-building firms, conglomerates, hotels, machinery companies, office equipment makers, and publishers and broadcasters.

Ralph Acampora, head of technical research at Kidder, Peabody & Co., believes the next leg up in the market will include many of the same names as the first rush. But he says the buying will spread to other than the top-tier companies in an industry. For example, in the first round, Procter & Gamble was very strong; in the next leg up he would expect Clorox to join in the surge. He also expects the energy companies and oil service stocks to participate in this part of the rally.

From a technical standpoint, Mr. Acampora expects the current profit taking to dry up when the Dow pulls back to the 970-980 level. The second phase should carry the Dow as high as 1,095 before a much larger correction sets in, he says.

By the time autumn comes to the bull market, the so-called secondary or tertiary stocks are running up. For example, in the retail sector, retailers of lesser quality will start to move. Mr. Alperstein notes that Macy's and Federated Stores moved in the initial surge. In this leg of the market, he would expect retailers such as L. Luria to start moving up.

Mr. Acampora notes that the final phase of the bull market is marked by overspeculation and much public participation. So far this time, he believes the individual investor has been only moderately interested in the market. ''They haven't been buying all the cats and dogs,'' he notes.''That is encouraging.''

Naturally, not all analysts believe the stock market will behave itself in such a predictable fashion. Richard McCabe, vice-president and manager of the market analysis department at Merrill Lynch & Co., says he doesn't expect to see the typical rotation in a bull market. ''This is not a normal business cycle,'' he explains, ''where you get a few years of expansion and then a contraction.''

Instead, he says, the shock of going from an inflationary environment to a disinflationary one will be more important to investors than the normal business cycle. Thus, he expects stocks that benefit from disinflation to flourish. This would include food stocks, consumer durables such as appliances, apparel and textile companies, drug chains, hospitals, retailers, mobile home manufacturers, restaurant chains, utilities, banks, insurance companies, and other companies sensitive to interest rates. He adds that ''from a technical standpoint, I can't see the basic cyclicals and energy stocks taking over the leadership from the consumer and utility stocks.''

Mr. McCabe says his advice to investors is to ''ride the winners'' and to use pullbacks to add more shares of the same stocks or buy the stocks you missed on the first surge.

Like a cold front from Canada, the long-awaited market correction roared through Wall Street last week. The Dow Jones industrial average, after gaining 236 points in nine weeks, gave back 21.98 points Oct. 14 and 15, closing at 993. 10, but gained 6.25 points for the week. Volume remained heavy and the NYSE reported volume to date has surpassed the total 1981 volume. Even though there was heavy profit taking in the blue chip stocks, many other issues managed to keep their gains, which some analysts said was a positive sign.

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