The first leg of the bull market is just about over. At least that is the developing consensus among some of the major stock market commentators.
The first thrust took the Dow Jones industrial average up 300 points, beginning in mid-August. About $330 billion of market valuation on paper was added to stocks listed on the New York Stock Exchange, and the bull was convincing enough to make the cover of Newsweek.
Now, however, some changes are taking place. Analysts note that in recent weeks the market has become ragged. It will surge 20 to 30 points on one day, but with little follow-through. And last week the news that Warner Communications earnings would not be as strong as predicted because of competitive pressures on a subsidiary, the Atari video games producer, sent a shiver through the whole market. Warner stock dropped 163/4 points in one day.
The difference between the market today and two months ago, says analyst Larry Wachtel of Bache Halsey Stuart Shields Inc., is when the market shoots up, investors, instead of rushing in, are now selling into strength. ''We're now entering a more discriminating phase,'' Mr. Wachtel says. In the first leg of the bull market, everything has gone up. In the second leg, he says, making money in stocks will be harder.
Monte Gordon, director of research at the Dreyfus Corporation, a manager of mutual funds, believes one of the reasons the market has become sidetracked is developments in Washington. The thrust of government policy is no longer anti-inflationary, he says, but toward job creation. ''The administration is in a weakened position to resist that,'' he said, adding, ''There is a disquieting similarity to what's been done in the past.'' For example, he believes the Federal Reserve Board is trying to ''fine tune'' the economy. Such moves ''have not been successful in the past,'' he said.
Richard Hoffman, vice-president and chief investment strategist at Merrill Lynch & Co., agrees that the first leg of the bull market is over. The second will begin once Wall Street perceives that the economic recovery is in place. He holds that the recovery will start once interest rates stabilize and the lower rates start to pull the market out of recession.
Mr. Hoffman says the second leg can run for a long period, ''until there is a fear that the economic recovery is too strong'' and will reignite inflationary fires. Whether or not there is a third leg, he says, will depend on how successfully the corporate sector reliquefies its balance sheet.
Philip Roth, a technical analyst at E.F. Hutton & Co., suggests that investors continue to buy stocks benefiting from ''disinflation.'' These include financial, retail, and consumer-oriented companies. Mr. Hoffman of Merrill Lynch says investors shouldn't ''overmanage'' their portfolios - that is, try to time the market's moves. He adds that they should avoid the temptation to ''short'' stocks, since bull markets ''take no prisoners on the short side.'' He recommends that people start to move some assets out of the bond market and develop positions in ''real growth stocks.''
Mr. Wachtel's advice is similar: ''This is the time you need a game plan.'' He suggests sticking with companies involved in high technology, health care, consumer businesses, or defense. ''You can't play every flurry,'' he concludes.