In the brave new world of Wall Street -- where institutions dominate financial markets, computers direct huge buying and selling programs, and weird episodes such as ``triple witching hours'' occur -- the old patterns don't quite hold. In the past, a one-day reversal of a bullish stock market could be troubling, but it took many such days to make investors think that a true correction was at hand.
And then many more down days, weeks, and months were needed for a consensus to form, saying that a bear market was in progress.
Time frames have now collapsed. The market is characterized by volatility. What used to take weeks takes hours. And stock market sentiment swings wildly between bull and bear in a matter of minutes.
What is happening, says Monte Gordon, director of research at the Dreyfus Corporation, a mutual fund family, is that the financial futures markets have now become the ``weather vane'' of investor sentiment.
When the market was bullish earlier this year, futures indexes were selling at a premium, indicating that many investors were taking a flier that the market's rise would continue.
But futures sentiment began to turn around in late summer. This was largely because of the rise of gold and platinum prices and the belief that inflation (and thus higher interest rates) might return.
The Dow Jones industrial average and other key market indexes continued up for a short time, but futures indexes fell. Then the 87-point day of adjustment (Sept. 11) came.
``If you want to know what people are thinking,'' says Mr. Gordon, ``there's no better indicator than the futures markets.''
A good example of this occurred last Friday, Gordon notes. Unemployment numbers were released around 8:30 a.m. and indicated the economy not growing as some analysts figured it would be.
That caused the stock market to rise sharply, since investors expected continued low inflation and moderate interest rates.
But on the futures markets, economic weakness was quickly interpreted as meaning lower corporate earnings. Thus futures prices fell below the Dow and Standard & Poor indexes, Gordon says.
Arbitrageurs moved in, and in short order the Dow swung 35 points into negative numbers. (It closed the day at 1,774.18, up 4.49 for the week.)
This sort of volatility reflects huge shifts of sentiment in very short periods of time, analysts say.
That 87-point record fall of the Dow three weeks ago, for instance, jolted many investors into bearishness overnight, observes David Bennett, a technical analyst with Prudential-Bache Securities in New York. But they might have turned ``too prominently bearish too quickly. There were visions of 1929.''
In Mr. Bennett's view, that caused an equal but opposite reaction: Negativism ran its course too quickly and bullishness soon reemerged.
Bennett expects a rally now back to the 1,875 area by November or December. But then, he thinks, there will be a steep correction early next year.
Phil Erlanger, at the Advest brokerage firm in Hartford, Conn., notes that bearish sentiment took hold quickly, after the 87-point drop. But he doesn't think it has quite played out yet.
The Dow, he points out, is still above its 200-day moving average. He expects to see it cross the line and predicts a loss of 5 to 10 percent more in value before the market resumes its rise.
``We need a moment like August of '82,'' Mr. Erlanger says, ``when the corrections and the bears have played themselves out, cash is high, and prices are cheap.''
He sees signs of this already in a falloff in mutual fund subscriptions and rising levels of institutional cash.
The market's volatility is a reflection of the divided thinking that pervades Wall Street, notes William C. Fletcher, chief investment officer of Independence Investment Associates of Boston, a money-management subsidiary of John Hancock Mutual Life Insurance Company.
One camp feels the economy is going to recover and that inflation might be a threat; the other sees continued weakness and not many signs of earnings growth.
The former is bearish when economic reports indicate renewed strength; the latter is bearish when reports show weakness.
These conflicting groups of investors have hair-trigger sensitivity and the ability to execute multimillion-dollar buy or sell programs instanteously. This is how the tremendous volatility occurs. Each piece of news -- such as last Friday's unemployment numbers -- sets off ``powerful forces,'' Mr. Fletcher says.
This money manager reckons there will be many more days of volatility until a consensus on the direction of the economy emerges sometime in the next few months.
``We're muddling through now,'' he says. ``We see the stock market as being fully valued relative to interest rates, and we don't expect it to move up much more.''
So perhaps it's really the same old story on Wall Street, albeit updated for the computer age: There are some bulls, some bears, and some fence sitters.
The difference today is that they tend to switch positions in the blink of an eye, sending millions of dollars of stocks surging through the market and causing big leaps or plunges.