The stock market, after its explosive April advance, has run up against what the analysts like to call "resistance."
The negative factors of higher inflation, tighter money and a still uncertain dollar that investors only a few weeks ago casually shrugged off in their exuberance to plunge back into the market now have returned as nagging concerns.
This troika of worries probably will inhibit another big market move for the near term, say a number of analysts. And they are skeptical that the market at this advanced stage in the economic cycle really has embarked on a sustained climb.
"This 100-point rise is not the first 100 points of a 200-300-point move as in 1974," said Leon Cooperman, chairman of the Investment Policy Committee at Goldman, Sachs & Co. "Inflation is too high and the direction of short- and long-term interest rates are wrong for there to be a major market advance," he added.
Goldman Sachs last week sent an advisory to its clients suggesting that they slightly reduce their equity exposure.
Eric Miller, who heads the Investment Policy Committee at Oppenheimer & Co., observed that "only a handful believe this is the beginning of a new bull market." He explained that he is doubtful because of "the stage of the economic cycle and because we think the strength of the economy will be . . . accompanied by a steady erosion of banking system and corporate liquidity."
A positive factor, however, is that the market has also demonstrated resistance on the down side.
Analysts point out that stock prices have held on to most of their recent gains, and that the market has not crumbled despite some worrisome inflation figures recently and the nervous anticipation that another upward ratchet in interest rates may come soon.
"There's good technical strength in the market, so it shouldn't pull back disastrously," noted Richard McCabe, a vice president for market analysis at Merrill Lynch, Pierce Fenner & Smith. One important plus for McCabe is that "people seem to still be extremely skeptical. And margin accounts have been mostly sellers for the past two weeks. On a big top, margin traders usually tend to be more exuberant. And that skepticism seems to be healthy."
The Merrill Lynch analyst looks for the market to plateau for the time being - a "sideways consolidation" of its recent gains - with a trading range of 800 to 810 on the Dow down side and between 840 and 850 on the up side. Then, in the summer, some further strength may push the market up to the 900 area, but not much beyond.
The market's major vulnerability, he adds, is "if interest rates go up drastically."
"The key factor is still inflation," said Jack L. Rivkin, research director at Paine Webber Mitchell Hutchins Inc.
Rivkin believes that one thing could set off another spurt of buying, and that is the possibility that one of the oil companies drilling off the East Coast in the Baltimore Canyon area could make a major oil strike.