When investors get no signals, any sign - even rumors - will do

George Bush wasn't alone in having communications problems last week. The Republican presidential standard-bearer increasingly found himself having to fend off questions about vice-presidential candidate Dan Quayle. The investment community was also faced with a communications challenge of sorts - needing to define whether the stock market was yet going to break free of the languor that has settled over trading during most of this summer, abetted by higher interest rates.

In fact, market-watchers were so eager to hunt for guideposts that at one point - last Wednesday, to be exact - the market seemed actually to rally on a rumor that Mr. Quayle was being bumped from the GOP ticket.

``The rumor that Quayle was going off the ticket was being heard everywhere,'' says Ernest Rudnet, a trader at Mabon Nugent & Co. ``I never believed it.'' Still, Mr. Rudnet says, that didn't stop investors from scrambling for any information, however dubious and speculative, to justify a market advance, as happened later that day, as the market closed up 37.34 points.

Wednesday's advance was more technical than political, although the false rumors about Quayle may have played a role, one way or another, he says. But the rumor points up the underlying characteristic facing the market today, the element of ``uncertainty,'' he adds.

``There are just too many uncertainties now for any sustained rally,'' Rudnet says. ``Inflation is worry No. 1.'' He sees the market continuing to languish, at least until after the election in November. He would like to see the Dow Jones industrial average drop another 200 to 300 points ``to wash it out'' before beginning a genuine uptick later this year.

The market's current sluggishness, of course, is hardly escaping attention, given that only a year ago last week the Dow hit its all-time peak of 2,722.42 points. By the end of last week, the market had closed up 1.43 points at 2,017.43.

Many technical analysts, the folks who specialize in studying all the charts and graphs that indicate the direction of the market, believe the current trading range will probably be with us for the rest of the year.

``We're now anticipating a period of stabilization in the market,'' says William Raftery, a technical analyst at Smith Barney, Harris Upham & Co. But there's ``no leadership'' in the market from any particular sector, he adds.

Alan Shaw, manager of technical research at Smith Barney, adds that the market, for all its momentary stability, continues to be marked by ``whipsaws and volatility.''

Still, this trading range, no matter how listless, can be seen as part of a new bull market, says Richard Band, a financial analyst and editor of Personal Finance, a newsletter published in Alexandria, Va. Mr. Band believes the current market will not go below 1,800. Moreover, he believes the Dow will climb back into the 2,400 range during 1989 - and even head up to 4,000 in the 1990s.

Band believes that the key to market performance is the direction of interest rates. Both long- and short-term rates, he maintains, will soon be heading down, which will help equities.

Band notes, for example, that during the past five months the Dow Jones utility index has ``been gaining relative to the Dow industrial average.'' That, as well as gains being made by interest-sensitive enterprises such as banks and insurance companies, which hold bonds, suggests that interest rates are close to peaking. At the same time, he argues, stocks that are linked to manufacturing, such as capital-goods stocks, have been underperformers lately, suggesting a slowing in the economy.

The upshot, as Band sees it: somewhat slower economic growth, thus lower interest rates, propelling the stock market higher.