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Wall Street appears to have still more fizz

As in the old soft drink slogan, December on Wall Street is often the pause that refreshes. And after such historic effervescence in November, some say a pause is in order.

The Dow Jones industrial average bubbled up almost 100 points last month. The 1,400 mark was left in a trail of empties as the Dow fizzed and gurgled toward 1,500. Last week the Dow closed the month at 1,472.13, up 7.80 points in four trading sessions (the market was closed on Thanksgiving).

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For the record: Eleven months into the year, the Dow has posted a whopping 21 percent gain. The enthusiasm for this rally, while not speculative, continues to grow.

Ground-pawing bulls now account for 56 percent of the investment advisers surveyed by Investors Intelligence, a newsletter based in Larchmont, N.Y. Many of the borderline ``advisers are rushing to get into the bullish camp,'' says editor Michael Burke.

In the past, about 80 percent of the time this level of optimism has resulted in a dramatic correction. But Mr. Burke notes that the momentum indicators -- trading volume, numbers of new highs to new lows -- are still favorable. And the Glum Guses occupying the bear camp are only slowly and ``grudgingly'' shifting positions.

So Burke doesn't expect a top yet. But two months or so from now, ``by February or March, I think the Dow will be lower than it is now.'' How much lower, he feels, will depend on how secondary stocks perform when the Dow weakens.

Oppenheimer & Co.'s market strategist, Michael Metz, sees ``nothing to suggest this rally is over.'' His case rests, not on an improving economy, but on mergers and stock buybacks, which continue to shrink outstanding equity at an ``unprecedented'' 4 percent annual rate.

High liquidity, the result of money supply (M-1) growth of 10 percent year to year, is providing ready cash for an upward move on the Dow of ``another 10 percent or so,'' he says. ``Perhaps we'll see 1,600'' in the next three to six months.

If this rally does continue, it will be bucking tradition. In Decembers over the last decade, ``the markets tend to go nowhere,'' notes seasonality pundit Yale Hirsch, publisher of the Stock Trader's Almanac and the investment newsletter Smart Money, based in Old Tappan, N.J.

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A number of crosswinds blow in December which tend to reduce volatility. This year, for instance, presents an ideal situation for tax-loss selling. This tax-reduction ploy involves selling stocks that have performed poorly to offset big gains in other issues.

Also, as the quarter draws to a close, institutional money managers often juggle holdings to spruce up their records.

In the past, this selling has pushed some stocks to new lows. That, in turn, spurs buying of these ``bargains.''

Studies by Hirsch show that stocks hitting new lows on Dec. 15 bounced back by Feb. 15 of the following year. On average, early-December discards rose twice as high as the New York Stock Exchange composite average.

By Christmas investors, being an optimistic lot, start scanning the tape for signs of Rudolph. More specifically, the traditional ``Santa Claus'' rally.

In fact, the rallies that do tend to occur in the last five days of December may simply be part of the well-known January effect, seasonality experts say. Studies show that January, on average, posts the largest market gains of any month in the year. Chart: Interest Rates. *Yields; Source: Bank of Boston.

Percent Prime rate 9.50 Discount rate 7.50 Federal funds 8.00 3-mo. Treasury bills 7.15 6-mo. Treasury bills 7.25 7-yr. Treasury notes 9.44* 30-yr. Treasury bonds 9.80*

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