On Tuesday, August 17, the Dow Jones Industrial Average made its largest one-day gain in history. So did the Standard & Poor 500 (by a spectacular 34%) and the NYSE Index. Coming as it did on the heels of 27-month lows, the surge described a classic whipsaw: Just when it looks like things are terrible (or terrific) the market does the opposite -- with a vengeance. But there is a serious question, perhaps answered by the time these comments appear in print: whether the dramatic reversal represented an inspired move back into equities, or whether -- incredible as it may sound -- the street was so unsure of itself that it took the word of a single person, Salomon Brothers' economist Henry Kaufman, that because business would be "bad" in the second half of the year, pressure would ease on interest rates.

Kaufman can be, and has been, as wrong as any of the rest of us. His earlier predictions of record high interest rates led to severe market declines, although the records themselves didn't, after all, materialize. Fundamentally, for equities to be sound investments, business someday has to be good again. But if the logic of economists is that bad business is good for stocks and good business is anathema to them, then we are indeed wandering around in a house of mirrors.

Speaking of which, discredited Reaganomics had a lot to do with the market's midsummer droop. No longer was the Street pinning hopes on such chimeras as the Laffer curve or the trickle-down theory that had boosted stocks a year ago. Investors finally understood that the economy was in the hands of inept administrators and realized that a business recovery was not about to take place under the weight of the largest tax increase in the country's history -- the same conclusion reached by the esteemed Mr. Kaufman. Despite the massive trading volume that poured into the market in the next two days, advancing stocks more than 50 DJI points before they tired, veteran practitioners realize that no bull market has ever started on the front pages of newspapers. One of the best bull markets in history -- that of December 1974 to September 1976, taking the Dow from 577.60 to 1014.79 -- began with barely a whisper in the midst of a deep recession.

Although history was set in the broad averages, conspicuously absent from the August 17 gain were one-day records for the American Stock Exchange Index and the NASDAQ OTC Composite. Because these two deal in the more speculative, smallercapitalization companies, this sector -- INC.'s turf -- did not excite the same buying frenzy as was seen in stocks with large capitalization. Whatever the outcome of August's Ebullient Tuesday, a major hurdle remains for equities -- the immense market top that has been accumulating since 1966. Even if the Kaufman rally turns out to be a self-contained mini-bull market (much like the mini-bear market sparked by Joe Granville a few months before), it probably wouldn't pierce the 9001000 area without much more "bottom work," that is, milling around at lower levels. A failure of the bull market to pierce the previous DJI high of 1051.70, set in January 1973, would add even more precariousness to this gathering storm.

INC. MARKET INDEX vs.

POPULAR AVERAGES

S&P NASDAQ

DJI 400 ASE Ind'ls INC.

% change -3 -1 -4 -2 -12

July-Aug.

Coll. %-point -19 -21 -27 -27 -38

change, 12 mos.

SMALL COMPANY INITIAL PUBLIC OFFERINGS:

JULY 1982

Offering First

O-T-C Size Price aftermarket

sym. Company Business/product ($ mil.) bid Underwriter

CTCQ Check Technology Mfg. checkbook 3.00 3.00 31/4 Craig-

printers Hallum

FNNIU Financial News Business-news 4.95 3.00 27/8 Paulson

network Investment

IMET Intermetrics Inc. Computer 5.60 7.00 7 L.F.

software Rothschild

products

(a) Multi-Tech Corp. Markets gov't 1.65 5.50 5/5/8 D.H. Blair

lab products

PCCM Price Communi Broadcast 0.71 5.50 57/8<8> Underhill

cations properties Associates

RYAN Ryan's Family Restaurants 4.39 9.25 91/4 Johnson,

Steak Lane

SSKY Super Sky Int'l. Skylight systems 9.60 13.00 13 Blunt Ellis

&Loewi

TRRA TERA Corp. Mfg. computer 40.00 16.00 161/4 Merrill

systems Lynch;

Hambr

echt &

Quist

Initial public offerings sold at $1 or less not included. Issues without underwriters not included. First aftermarket bid is approximate. (a) ticker symbol not yet assigned best effort.

Offering data sources: GOING PUBLIC: The IPO Reporter, 1528 Walnut St., Philadelphia, PA 19102.