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Market slippage: a pause for bulls or a signal for bears?

Like the old Paul Simon tune, the stock market has been ''slip slidin' away'' the past few weeks. What if you are an investor who has held on to a mutual fund or a handful of stocks through thick and thin? Should you cut your losses and move out of equities and into money markets or certificates of deposit? Do you hang on? Or perhaps even bravely hunt for bargains?

The answer depends on your exposure in the market, your tolerance for risk, and your view of where the economy is going.

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Thomas V. Williams, an equity strategist with Chicago's Kemper mutual fund group, argues that ''if you are truly one who invests for the long term, it's not a bad time at all to buy and stuff it away.'' He notes that although technology-oriented stocks have experienced a heavy shakeout over the past year, some of these will still be the growth stocks of the next decade.

Thomas H. Bailey, president of the Denver-based Janus Fund, on the other hand , contends that it makes more sense for a small investor to cut back on stocks and move into money markets. He plugs his own fund's ability to make this switch for the investor by moving more of the fund's assets to cash or cash equivalents.

The question most analysts have is whether the market is still primarily bullish - although suffering from an extended ''correction'' - or now primarily bearish.

The Dow Jones industrial average closed Friday at 1,107.10, down 26.69 points for the week. It dipped below 1,100 during the day on Thursday, although it closed that day at 1,103.43. That was the lowest level since Feb. 23, 1983, when it stood at 1,096.94. But then, the Dow was heading north, not south. It reached a bull-market high of 1,286.64 last Jan. 6. before beginning its descent.

Outside events have been unsettling for investors. Interest rates are high and may go higher. Trouble in the Persian Gulf could affect Western oil supplies. And financial institutions are looking less than rock solid.

Bank stocks were jolted last week by rumors that Manufacturers Hanover Trust was having funding problems. The nation's fourth-largest bank denied the rumors, as did a number of banking officials. The bank has one of the largest exposures of foreign debts of any of the nation's banks.

The questions about this bank came two weeks after a run on Continental Illinois National Bank by foreign investors. That prompted the largest bank rescue program in American history to keep the institution going. Continental chairman David Taylor says some large foreign deposits have come back to the bank and that funding was stabilizing.

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Mr. Bailey of the Janus Fund reckons the market has turned heavily bearish and traces the end of the bull phase to June of '83. In this climate his fund has only a 40 percent exposure in stocks. He notes that in the past there have been ''deeper reasons for being in cash'' than there are today, citing Watergate and the oil crises of the '70s. Still, at present he sees the economy as too strong and federal financing needs as too great. This is prompting a ''credit crunch'' that is driving up interest rates and driving down the market.

''Either stocks continue to get smashed or - more likely - we will have an ensuing recession,'' Bailey says. ''That will cause credit demands to weaken, and perhaps there will be some reduction of the (federal budget) deficit and interest rates will come down. In the meantime, the primary trend of the market is down.''

Bailey mentions the possibility of overpessimism setting in on Wall Street, in which case, he says, a rally would ensue. His strategy then might be ''to redeploy some cash into some selected stocks and take advantage of a short upward move.''

Mr. Williams of Kemper says that in a market that is subject to ''mood extremes'' it is best not to make any drastic moves. If anything, he urges, ''move against the trend.'' His fund's strategy is to maintain about 25 to 30 percent cash, which he considers a vote for the stock market: ''Anything up to 30 percent cash is offensive; it's waiting to recommit.''

Williams characterizes the market as still in a ''correction'' phase (that is , a rollback from the speculative excesses of 1982 and '83). By waiting before making any big commitment, he says, investors will be able to determine if this is so, or if, in fact, it is now a bear market.

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